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Construction Costs Up 5.1%

Phoenix’s cost escalation chart illustrates the percentage change per period and the cumulative percentage change throughout the charted timeline. Courtesy of Rider Levett Bucknall

By Roland Murphy for Arizona Builder’s Exchange

International property and construction consulting firm Rider Levett Bucknall has released its North American Quarterly Construction Cost Report for Q1. The comprehensive review of market data from multiple leading sources shows an average national increase in construction costs of roughly 5.1 percent from Jan. 1-Dec. 31, 2016.

Phoenix posted an increase of 3.65 percent. San Francisco (14.7) and Los Angeles (8.4) led the country in percentage increases.

“Our Comparative Cost Index tracks the ‘true’ bid cost of construction, which includes, in addition to costs of labor and materials, general contractor and sub-contractor overhead costs and fees (profit),” RLB said in the report. “The index also includes applicable sales/use taxes that ‘standard’ construction contracts attract. In a ‘boom,’ construction costs typically increase more rapidly than the net cost of labor and materials. This happens as the overhead levels and profit margins are increased in response to the increasing demand.”

In assembling the report, RLB collected data from its offices in 12 U.S. and two Canadian cities and also surveyed major construction sectors to identify high and low construction costs in each one. The firm also pulled data from the Consumer Price Index, labor reports, the Architectural Billings Index and other sources in an attempt to create a complete market overview.

The new report adds in data from Toronto and Calgary for a North American overview and takes a highly graphic approach in its reporting to provide quicker interpretation of the data.

In discussing cost increases in the national market as a whole, the report said, “All of this appears against a backdrop of a variable economy, which experienced a GDP of 1.9 percent as of the fourth quarter of 2016, down from 3.2 percent in the third quarter.”

RLB also notes U.S. construction put-in-place ended the period with an adjusted annual rate of $1.18T, 1 percent below the revised December estimate.

Download the full report here.

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