PHOENIX, ARIZONA, 1 August 2008 - As the construction markets and the economy in general continue to cool, construction prices are still on the rise, mainly as a result of materials cost escalation, according to a market commentary compiled by global construction and property consultant Rider Levett Bucknall.
Rider Levett Bucknall's research suggests that for the first six months of 2008 the national average increase in construction cost was 3.1%. For the second quarter of 2008, the Seattle and Honolulu markets experienced the greatest increases in construction costs, showing inflation for the period of just over 2.0%. Conversely, construction costs in Orlando and Washington D.C. experienced less significant increases of under 1.0%.
The country is seeing a decrease in overall construction spending. The value of construction put in place for the first half of 2008 was 5.1% below what it was for the same period in 2007. Rider Levett Bucknall attributes this to the still declining residential construction market, an overall tightening in the availability of credit, and a general softening in the U.S. economy.
However, Rider Levett Bucknall's research is still showing positive construction cost inflation in upwards of 7.0% for the calendar year in Boston, MA, Honolulu, HI, Las Vegas, NV, New York, NY, Orlando, FL, Seattle, WA, and Washington, DC as surges in the materials costs for steel and oil―driven by global demand, a weakened dollar, and speculation―are putting upward pressure on the true bid cost of construction.
"The price of crude oil impacts nearly every sector of the economy; the construction industry is no exception," says Rider Levett Bucknall President, Julian Anderson. "For this reason, we tend to keep an eye on oil prices as an indicator for fluctuations in cost for many of the materials and supplies typically used in construction."
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-reports.html.