Have You Noticed a Rise in Costs for Your Construction Projects? You’re Not the Only One.
There are several evolving factors impacting profits of construction companies and sub-contractors today. Despite new revenue opportunities due to the 100 billion dollar growth in construction output in 2021, there is a shared pain point in rising costs in both residential and commercial construction.
Why are Construction
Costs Rising?
There are several complex factors causing inflation in the construction industry; however, here are a few simplified outlining factors, some you may have even noticed first hand.
Supply Chain Disruptions
Skyrocketing global shipping costs, combined with a backlog of domestic freight operations, are causing a shortage of goods and materials, inflating costs. The global supply chain remains fragile, adding complexity and uncertainty to construction projects. Import prices are rising much faster than export prices for building materials, with imported building materials more than twice as expensive as exported materials in late 2021. Global events like the war in Ukraine compound supply chain disruption inn addition to ongoing COVID-19 concerns and restrictions.
Rise in cost of raw materials
There’s a much higher demand for new residential and commercial construction. However, the number of raw materials available hasn’t changed much. Companies are producing them as fast as possible, but the demand is so high that it’s challenging to keep up. The increased prices for materials are primarily caused by higher demand and supply chain interruptions. According to the April Producer Price Index (PPI) report, almost all construction materials are more expensive than ever, including softwood lumber, gypsum products, and ready-mix concrete.
Shortage of Skilled Labor
Have you had challenges when it comes to hiring for your construction projects? If so, you’re not the only one. There are many construction jobs that remain unfilled and contractors have difficulty finding someone for the position. Although the strong boom in the construction market due to increased spending, it has worsened the capacity for employers to fill various job roles.
Source: Statista Research Department
