PHOENIX, ARIZONA, 20 May 2009 - A quarterly publication from global property and construction consultant Rider Levett Bucknall reports an overall decline in construction prices for the second consecutive quarter. This present dramatic deflationary momentum is attributable to decreasing structural steel costs and, to an even greater degree, growing contractor hunger, particularly within the subcontract trades. Contractors' concerns about the availability of work have overshadowed commodities' role in driving construction costs, as reflected in more competitive bids.
Rider Levett Bucknall's research suggests that between January 2009 and April 2009 the national average decrease in construction cost was 5.1%. All locations reported deep quarterly drops with Boston and Portland at the less dramatic end of the spectrum, reporting declines of 3.2% and 3.7%, respectively, and Denver and Seattle showing more substantial quarterly decreases of 7.5% and 7.9%, respectively.
In the recent past, material price volatility together with the high volume of work available have been the driving forces of substantial increases in construction costs. From April 2001 to October 2008, inflation in the price of labor and materials-as measured by Engineering News Record's Building Cost Index (BCI)-overtook the increase in the Consumer Price Index (CPI) by approximately 8%. In the same period, bid prices-as measured by Rider Levett Bucknall's National Construction Cost Index (RLB Index)-outpaced an increase in the CPI by more than 23%.
"Even with the drop in bid price levels recorded in our latest National Construction Cost Index, a sizeable gap remains between the three indices", says Rider Levett Bucknall President, Julian Anderson.
"It is our view that, as well as having to endure a shortage of projects, an uncertain economy and commodity price volatility, contractors and subcontractors will also have to deal with the closing of this index 'gap', the effects of which will be magnified at times by the seemingly illogical bidding tactics of some competitors."
Each quarter Rider Levett Bucknall reports on the comparative cost of construction in 11 U.S. cities, indexing them to show how costs are changing in each city in particular, and against the costs in the other 10 locations. Together with additional international and national cost compendia, the cost research is meant to equip clients with proficient and relevant information to assist in key business decisions.
To download the latest version of the Construction Cost Report, or to view past issues, visit http://www.americas.rlb.com/cost-research_quarterly.html.