A quarterly report from International Property and Construction Consultants Rider Levett Bucknall predicts continuing difficulties for the ailing construction industry. The report notes that the spreading financial crisis and resultant credit squeeze are pushing down demand for residential and commercial construction.
"We have seen both public and privately funded construction projects being placed on-hold, incredibly, some well into the construction phase as well as during programming and design phases," said Julian Anderson, Rider Levett Bucknall President. "This adjustment to our industry suggests to us that, at least in the near-term, we are likely to experience a continued downward spiral with job losses, reduced construction volume, investor and lender fright and calls for government support of the construction industry. In other words, loads of gloom for bricks and sticks."
"Bailouts and buyouts aside, the real questions for our industry is just how long the financial crisis and its attendant credit freeze will last and what long-term effects it will have on capital investment in all sectors of construction," said Peter Knowles, Rider Levett Bucknall Executive Vice President.
Barring some major capital works programs by the government; Rider Levett Bucknall predicts that the national construction industry will suffer for several years with significant downward pressure on prices and a dramatic reduction in overall capacity, followed by a slow recovery.
The United States construction industry is already seeing a downturn in overall construction spending. The value of construction put in place for the first three quarters of 2008 was 5.9% below what it was for the same period in 2007.
The recent contraction of the built industry and the downward swing in materials and supply prices has already done much to ease construction cost escalation as compared to previous years. Rider Levett Bucknall's research concludes that the national average increase in construction cost for the third quarter of 2008 was approximately 1.1%, as compared with approximately 2.4% for the same period in 2007.
Even though Rider Levett Bucknall expects that this de-escalation trend should continue as projects stall and competition for work further increases, there is also some risk that the massive amounts of liquidity that is being pumped into the economy will stimulate inflation which would then produce the nasty result of significant cost escalation within an unusually depressed market.
Each quarter Rider Levett Bucknall reports on the comparative cost of construction in 12 U.S. cities, indexing them to show how costs are changing in each city in particular, and against the costs in the other 11 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.