Beyond the Build

Commodities Pricing

Construction Costs Headed Up in ’12…But How Much?

Economics of construction cost can be confounding at times.

Just when we think pricing should stabilize, it moves in the opposite direction.

Knowing the current cost for a project maybe painful, but it sure beats the alternative. This Construction Executive article summarizes the “why” behind the materials aspect. Factors impacting cost are:

*Supply/demand balance;

*The amount of speculation in futures markets;

*Changes in basic design parameters/building codes.

Depending on region and construction type, 2011 costs rose between 6% and 8%. This sounds large, I know, given the economy’s relative slow growth. While demand was still mostly slow, it’s the same thing we have heard for a few years: “global growth emerging nations.”

Specific to our market, I asked Charley Saunders, head of our estimating team, to give me his take. His thoughts:

  • There was a spike at the end of 2011 and the first 2 months of 2012, but things appear to be leveling off.
  • Steel has been particularly volatile.
  • New energy codes are coming into play and we are seeing price spikes in roofing, storefront and HVAC systems. These changes can be significant and should not to be overlooked in the pro forma.
  • Oil/gas prices are still inching upward which, if unchanged, will put upward pressure on pricing.
  • Some trades appear to be playing games with the specifications. We are paying close attention to scoping sub/vendor quotes to insure they are per plans and specs. We are not sure why, but this has been a issue recently.

How have prices changed in your area? What trends are you seeing?

Merrill Stewart Jr.

Merrill Stewart is Founder and CEO of The Stewart/Perry Company, a commercial building contractor based in Birmingham.