Construction costs rise
Construction costs in the U.S. rose 5.7% in 2018 with six metro areas experiencing increases above the national average.
That’s according to Rider Levett Bucknall’s “First Quarter 2019 North American Quarterly Construction Cost Report.” Of the 12 U.S. metro areas in RLB’s report, those experiencing the biggest annual cost increases were Chicago (7.6%), Portland, Oregon (7.1%), San Francisco (6.7%), Phoenix (6.7%), Washington, D.C., (6.5%) and Seattle (6.4%). Six metros — Las Vegas (5.4%), Honolulu (4.8%), New York (4.5%), Boston (4.4%), Los Angeles (4.4%) and Denver (4%) — had cost increases that were lower than the national average.
The RLB index tracks the ‘true’ bid cost of construction, which includes the costs of labor and materials, general contractor and sub-contractor overhead costs and fees (profit). The index also includes applicable sales/use taxes that ‘standard’ construction contracts attract.
RLB noted that in a ‘boom,’ construction costs typically increase more rapidly than the net cost of labor and materials. This happens as the overhead levels and profit margins are increased in response to the increasing demand. Similarly, in a ‘bust’, construction cost increases are dampened (or may even be reversed) due to reductions in overheads and profit margins.
That’s according to Rider Levett Bucknall’s “First Quarter 2019 North American Quarterly Construction Cost Report.” Of the 12 U.S. metro areas in RLB’s report, those experiencing the biggest annual cost increases were Chicago (7.6%), Portland, Oregon (7.1%), San Francisco (6.7%), Phoenix (6.7%), Washington, D.C., (6.5%) and Seattle (6.4%). Six metros — Las Vegas (5.4%), Honolulu (4.8%), New York (4.5%), Boston (4.4%), Los Angeles (4.4%) and Denver (4%) — had cost increases that were lower than the national average.
The RLB index tracks the ‘true’ bid cost of construction, which includes the costs of labor and materials, general contractor and sub-contractor overhead costs and fees (profit). The index also includes applicable sales/use taxes that ‘standard’ construction contracts attract.
RLB noted that in a ‘boom,’ construction costs typically increase more rapidly than the net cost of labor and materials. This happens as the overhead levels and profit margins are increased in response to the increasing demand. Similarly, in a ‘bust’, construction cost increases are dampened (or may even be reversed) due to reductions in overheads and profit margins.