In today’s construction news, Gordian’s new Quarterly Construction Cost Insights Report for Q3 2023 shows that material costs are still high compared to past years, but prices for building and construction materials are starting to level off after years of big changes. On the other hand, although sales of construction equipment are expected to decline in 2023, it will still be one of the best years ever for sales in the US, which was one of the top performing markets last year.
Prices of Building Materials in the U.S. Construction Market Are Getting Closer to Being Stable
Original Source: U.S. construction market moves toward building material price stabilization
Gordian’s Q3 2023 Quarterly Construction Cost Insights Report shows material costs remain high, but building and construction material prices are stabilizing following years of volatility.
Top industry experts from Gordian, Gilbane, McCarthy Building Companies, and DPR Construction discuss construction material cost trends and provide new solutions in this research.
Insecurity persists. Construction material indices show price stabilization in 2023, however individual goods may vary. Lumber, steel pipe, and aluminum costs have dropped double-digits in the past year, but concrete, glass, gypsum, and insulation have increased.
Some products, like structural steel, are heading lower toward pre-pandemic levels, but Gordian Construction Index Manager Adam Raimond doesn’t expect they’ll reach those levels soon. He expects prices to level or rise moderately again because construction material demand is rising.
In 2024, practically every category is predicted to reach a “normal” price change, although labor shortages and a busy market may offset material cost decreases. Pricing will also depend on regional cost pressures. With most building materials changing less than 5% annually, the industry is expected to return to more predictable pricing.
The Quarterly Construction Cost Insights Report analyzes construction material cost data. The pricing patterns of six main building components will be examined: structural steel, framing wood, blocks of concrete, conduit,electric copper wire, and fiberglass insulation.
The report also examines the historical cost index, which shows pricing patterns, and the city cost index, which shows local market variances.
The report describes Gordian’s RSMeans Data team’s national average material cost calculation and building models.
Impact of New Regulations and Investment Requirements on the Industry
Original Source: US construction: How new laws and investment needs impact the sector
Andy Brown explains that government backing and increased infrastructure and environmental investment have boosted US construction.
Last year, US construction equipment sales reached a record high. While sales are expected to dip in 2023, it will still be one of the strongest years ever for US sales. Although equipment quantities may reduce, regional building is shifting toward infrastructure, which will boost sales of heavier (higher-value) equipment. While the number of computers sold may reduce, segment revenues will climb.
Government actions
Government policies like the IIJA, IRA, and CHIPS Act have benefited the sector greatly. The US Department of the Treasury’s Office of Economic Policy reports a doubling of real manufacturing building spending since 2021. The Biden Administration is using “modern supply side economics” to boost productivity by investing in infrastructure, high-tech industry, and employees.
The Treasury research stated, “While it can be difficult to compare such granular data across countries, the surge appears to be uniquely American – not mirrored in other advanced economies.”
An Associated General Contractors of America review of government records confirmed that a scarcity of labor had long plagued the business, despite rising demand.
According to AGC study of new government employment statistics, construction employment increased in 226 of 358 metro regions between July 2022 and July 2023.
Association officials said demand for many types of construction remained strong in most regions, but firms still had hundreds of thousands of vacant positions.
“Demand for construction projects remains strong nationwide and most metros have continued to add construction jobs in the past year,” said association chief economist Ken Simonson.
However, there were 378,000 unfilled construction job vacancies at the end of July, suggesting that even more markets might have seen year-over-year employment improvements with enough qualified employees.
Texas’ Dallas-Plano-Irving added the most construction jobs (12%), followed by NYC (9%). Over the year, 80 metro regions lost construction jobs and 52 were stable. Miami-Miami Beach-Kendall, Florida lost the most jobs (8%), followed by Nassau County-Suffolk County, New York (3%).
Investment needed in infrastructure
While federal spending has grown, fixing the US’s aging infrastructure needs more.
According to the American Road & Transportation Builders Association (ARTBA) examination of the recently released US Department of Transportation 2023 National Bridge Inventory (NBI) database, one in three US bridges need repair or replacement.
Over 222,000 US bridges need major repairs or replacement, or 36%.
Nearly 42,400 bridges need repair and are “structurally deficient.” Traffic crosses these structures 167 million times daily.
The number of bad bridges fell by 560 from 2022. Repairing them all would take 75 years at the current rate.
The report by ARTBA head economist Alison Premo Black estimates that all repairs would cost over US$319 billion.
The 2021 federal Infrastructure Investment and Jobs Act (IIJA) bridge formula funds provide US$10.6 billion for states to fix infrastructure, with another US$15.9 billion available in three years.
As FY 2023 ends on September 30, states have committed US$3.2 billion (almost 30%) of bridge formula money to 2,060 bridge projects, with US$7.4 billion remaining.
Over the past five years, bridges in ‘fair’ condition have increased while those in ‘poor’ or ‘good’ condition have decreased. Nearly half of US bridges (48.9%) were fair in 2023.
US Department of Transportation inspection ratings and classifications classify bridges as good, fair, or poor.
Reducing emissions
Meanwhile, the construction industry leads carbon reduction initiatives.
The California building code now limits embodied carbon emissions in commercial and school buildings.
The California Building Standards Commission (CBSC) approved two building code modifications, making it the first state to enforce embodied carbon reduction in some projects.
The American Institute of Architects (AIA) California, which worked closely with policymakers on the changes, said the new code will “limit embodied carbon emissions in the construction, remodel, or adaptive reuse of commercial buildings larger than 100,000 square feet (9,230 square metre) and school projects over 50,000 square feet (4,650 square metre).
The amendments take effect July 1, 2024. The 2022 California Green Building Standards Code (CALGreen), California’s first statewide green building code, was created in 2007 to augment the regular code.
Embodied carbon includes carbon emissions from building manufacturing, construction, maintenance, and demolition.
“This action is a real catalyst for change that will push the industry forward in rapidly addressing the growing climate emergency,” said AIA California Vice President of Climate Action William Leddy.
Construction accounts for 40% of greenhouse gas pollution in California, the world’s fifth largest economy. California promotes sustainable building and reduces embodied carbon to combat climate change.
Reusing at least 45% of an existing structure, using materials with precise emission limitations, and employing a performance-based strategy that analyzes a building’s lifecycle are compliance possibilities.
Existing buildings are most sustainable. Prioritising reuse of existing buildings accelerates the reduction of embodied carbon emissions from new construction and ‘incentivizes’ the industry to address California’s severe housing crisis more quickly and efficiently, creating more sustainable and resilient communities, said Leddy.
Construction workers may face worse conditions as global temperatures rise. The construction sector will be watching the news that a Texas judge found a new law that would limit water breaks for construction workers by diminishing cities’ capacity to set local laws unlawful.
Proposed law is controversial
Governor Greg Abbott approved a state law last summer to prevent towns and counties from passing local rules. Austin and Dallas’ required water breaks might be affected.
The law, scheduled to take effect on September 1, has been controversial during a record-breaking heat wave. Houston sued the state over the law this summer.
In late August, State District Judge Maya Guerra Gamble declared the law unlawful. The bill, which backers say will reduce state-wide regulation variation, is set to take effect.
The new verdict gives towns ammunition to fight lawsuits challenging their local policies under the new state legislation. Texas appealed the verdict.
Real GDP growth in the US is expected to be 1.8%-2.2% in 2023 and 1.2%-1.4% in 2024. Oxford Economics predicts that US construction work will grow by almost 30% over the next 15 years to over US$1.8 trillion by 2037, up by almost US$400 billion. Even if this projection is optimistic, US construction is looking well.
Summary of today’s construction news
To sum it up, the historical cost index, which provides a more detailed look at pricing trends, and the city cost index, which provides a focused view of localized market variances, are also examined in the report. The study includes the building models used to obtain the price data and an explanation of how Gordian’s RSMeans Data team calculates national average material costs.
On the other hand, real GDP growth in the US is expected to be 1.8%-2.2% in 2023 and 1.2%-1.4% in 2024. Oxford Economics predicts that US construction work will grow by almost 30% over the next 15 years to over US$1.8 trillion by 2037, up by almost US$400 billion. Even if this projection is optimistic, US construction is looking good.
