U.S. Construction Spending Reaches Highest Level Since 2008, Says Report
Third Quarter 2014 USA Construction Cost Report shows 1.38% increase in construction costs over last quarter, may indicate significant uptick in costs as broader economy recovery continues, says Rider Levett Bucknall.
PHOENIX, AZ – Rider Levett Bucknall – international property and construction consultants, and industry leader in cost research – reported that U.S. construction spending is at its highest level since 2008, although construction costs increased by 1.38% in the second quarter of 2014 (5.52% on an annualized basis). The firm published its findings in its newly released Third Quarter 2014 USA Construction Cost Report.
Rider Levett Bucknall’s research indicates that recent optimism about the construction industry has been heightened by the news that construction spending rebounded strongly in July, reaching its highest level in six years. Improvements were shown in both private and public construction investment and manufacturing activity.
According to the U.S. Department of Commerce, construction put-in- place during June 2014 was estimated at a seasonally adjusted annual rate of $950.2 billion, which is 1.8% below the revised May estimate of $967.8 billion. The June 2014 figure is 5.5% above the June 2013 estimate of $900.3 billion. The value of construction for the first six months of this year was $445.1 billion, 7.8% above the same period in 2013.
Optimistic outlook, but significant rise in costs may be on the horizon
The firm’s research further indicates that the increase in construction costs for the period, which combined with other notable increases in 2014, may be the first signs that a potential uptick in construction costs is looming.
Rider Levett Bucknall tracks construction costs in 12 major U.S. cities. From April 1, 2014 to July 1, 2014 the national average increase in construction cost was 1.38%, the largest increase in the last six years. Boston, New York, San Francisco and Washington DC all experienced increases between 1.5% and 1.67% for the period with Honolulu experiencing the largest increase of over 3.0%. All other locations experienced gains ranging from 0.69% (Los Angeles) to 1.27% (Chicago).
Lack of skilled workers a growing concern, likely trend, firm warns
Rider Levett Bucknall’s report also notes that much of the recent cost increases can be attributed to the lack of available skilled construction workers to support increased demand within the industry – a trend that will most likely become more severe as demand continues to grow.
This lack of skilled labor is already creating a strain on the construction industry in some regions, particularly in the oil boom states and in cities such as New York and Honolulu.
“In order to get ahead of a potentially significant rise in construction costs, developers should begin implementing different strategies now,” states Julian Anderson, president of Rider Levett Bucknall North America. ”Strategies to consider may include early procurement of key inputs, fast tracking of the project and increased focus on cost planning of the project.”
About the Rider Levett Bucknall Quarterly Construction Cost Report
Rider Levett Bucknall reports on the comparative cost of construction in 12 U.S. cities on a quarterly basis, indexing them to show how costs are changing in each city in particular, and against the costs of the other 11 locations. Together with additional international and national cost compendia, the cost research equips clients with complete and relevant information to assist in key business decisions.
About Rider Levett Bucknall
Rider Levett Bucknall is an award-winning international firm known for providing project management, construction cost consulting, and related property and construction advisory services – at all stages of the design and construction process. The firm’s North American practice has offices in 21 major cities across the U.S. and Canada including Boston, Calgary, Chicago, Denver, Honolulu, Las Vegas, Los Angeles, New York, Phoenix, San Francisco, Toronto, and Washington D.C. Recently, Rider Levett Bucknall was chosen by AZ Big Media as one of Arizona’s Most Admired Companies.
With more than 3,500 employees worldwide, Rider Levett Bucknall brings unparalleled value and service to its prestigious group of clients, through its robust experience and high-level expertise. The firm enjoys a professional heritage that spans over 225 years, and it continues to be a global leader in the construction industry throughout the Americas, Asia, Europe, the Middle East and Oceania.
For more information, visit www.americas.rlb.com and for the latest company news and construction cost trends, follow the firm on Twitter @rlbamericas.
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