A new report from construction consultancy firm Rider Levett Bucknall details how construction costs have changed in 12 U.S. cities since the COVID-19 pandemic began, according to www.constructiondive.com.
Broken down by market, all U.S. cities in the report saw at least small gains, except for Chicago, which experienced a 1.29% decrease in comparative costs from October 2019 to October 2020. Costs in Los Angeles and San Francisco rose the most for the year. The report also shows despite the COVID-19 outbreak, the national average for construction costs rose about 2.03%.
The RLB Comparative Cost Index tracks the true bid cost of construction, including labor, materials and general contractor and subcontractor overhead costs and fees. The report says during booms, construction costs typically increase more quickly than the net cost of labor and materials because the overhead levels and profit margins rise in response to increasing demand. In a weakened market, construction cost increases are stifled or may be reversed because of reductions in overheads and profit margins.
The report also details indicative construction costs for eight building sectors in each city. These numbers range from $930 per square foot for general hospital space in Los Angeles and $800 per square foot for prime office space in New York City to $70 per square foot for warehouse space in Las Vegas and Phoenix.
The numbers show the U.S. construction industry, at least in major cities, is continuing to gain value. With its essential status, many projects underway at the start of the pandemic could continue, providing jobs when many workers in other industries were unemployed.
Although construction costs in most cities saw increased, a slowing U.S. economy could affect those numbers in 2021.
“In the first half of 2021, the overall economy is unlikely to accelerate,” said RLB North America president Julian Anderson. “But in the second half of the year, as the agenda of the Biden administration gains traction with its recovery and stimulus plans—particularly programs that address both infrastructure improvement and job creation, which are likely to receive bipartisan support—I’m optimistic that we could see a dramatic comeback for the AEC industries.”
