Anyone who’s invested in a new building, a remodel, or a new build-out in the last few years has likely raised their eyebrows at the initial estimates they receive from architects and builders. Building has always required a significant investment, but in the last 20 years, it seems like the costs of construction have skyrocketed. And that’s because they have.
But before you accuse your builder or your architect of being shysters, let’s take a look at why construction costs are on the rise. It’s more complicated than you think.
Construction Costs by the Numbers
In the last 20 years, construction costs have risen more than 100 percent nationally. In the last few months, construction costs have increased faster than rents, making it more difficult for property owners to afford remodeling and new construction projects. As the editors of Design Cost Data magazine point out, the construction cost index took nearly 60 years to rise from 0 in 1940 to 100 in 1998, but only 20 more years to double to 200. That dramatic rise in costs have put extra pressure on commercial property owners and tenants when it comes time to build.
Causes of the Rise in Construction Costs
So, what’s causing the rise in construction costs?
Construction Labor Shortages
During the Great Recession, lack of building projects forced many construction workers out of their trades and into other fields. But by 2010, people were building again, but few workers were available for hire. Ever since, the demand for labor has outpaced the supply of construction workers. This imbalance increases the cost of construction labor and extends project timelines, which results in higher overall project costs.
Increase in Building Material Costs
While prices fluctuate year-over-year, overall, the cost of building materials is on the rise. Iron, steel, gypsum, glass, and concrete are all more expensive today than they were in 2000. Changes in tariffs placed on building materials manufactured abroad have made estimating the cost of materials challenging. The higher price of materials results in a higher overall project cost.
Evolving Local, State, and Federal Building Standards
Regulation is the third major factor contributing to the rapid rise in construction costs. Code compliance, permitting, labor regulations, and materials standards all increase the cost of construction and can sometimes extend project timelines. Approximately 98 percent of developers in the United States have experienced increased costs due to building code changes. These costs are passed on to the property owner or tenant.
What You Can Do
When construction costs are high, it’s more important than ever to work with a builder who is committed to honesty and integrity and who will do everything possible to give you a thorough understanding of what it will cost to complete your project. That’s Scott Build, and it’s what makes us the Master Builder. We tell our clients what it will take to finish their projects, not start them.
For a clear-eyed understanding of what your building project will cost and to work with a builder who will uncover every opportunity to save costs without sacrificing quality or safety, contact Scott Build today.