The Producer Price Index for construction goods rose 5% over the three-year period ending in November 2020, per the Association of General Contractors.
There are many factors causing the rising cost of materials. Tariffs and trade issues drive costs up, as do environmental regulation and changing demand. Many projects require lumber, steel, fuel and iron, which have all seen drastic increases recently. In just one year, the cost of crude petroleum went up 49%, lumber 29%, and iron and steel 14%.
As a result, total cost of projects rose over five percent in 2018 alone. In some places, like California, this increase can be as high as 10%.
While some firms are working closely with contractors to lower costs during the pre-development stage, prices are changing so rapidly that their estimates may be completely off once the project begins.
Rising interest rates are likely to compound all types of costs, resulting in further pressure on total construction. Technologies like drones, AR and BIM will provide assistance in maintaining project volume and combat this cost pressure.
There are many ways to combat the rising costs in the construction industry, but each region and specialization will need to react differently.
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