Construction costs have risen by 1.29% compared to the fourth quarter of last year and are 5.85% higher than the same time last year, according to construction advisory firm Rider Levett Bucknall's (RLB) quarterly Construction Cost Report.
Meanwhile, the number of cranes in operation across the nation has decreased by 9% between the third and fourth quarters, suggesting a potential slowdown or shift in construction activity.
This combination of increased costs and reduced crane use indicates factors such as market conditions, supply chain disruptions and regulatory changes could be influencing the construction industry.
Major cities, including Boston, Chicago Honolulu, Los Angeles, New York and Washington, D.C., all saw increases in construction costs above the national average for the quarter while Denver, Las Vegas, Phoenix, Portland, San Francisco and Seattle experienced gains that were less than the national average.
Cities that saw an increase in crane counts include Calgary, Las Vegas and Los Angeles. Cities where the number of cranes declined more than 20% include Boston, Chicago, Denver, New York City, Portland, San Francisco and Washington, D.C. Honolulu, Phoenix, Seattle and Toronto held steady with their crane counts.
"After the past few years of economic uncertainty, I am cautiously optimistic about the construction industry in 2024," RLB North America President Paul Brussow said. "Despite having reached extremely high peaks, prices for construction materials are finally on a downward trajectory. While the growth of privately funded projects may be soft, public funding for manufacturing and infrastructure projects will help drive industry growth."
Brussow said he is cautiously optimistic about inflation and that construction cost pressures should ease in 2024 more than in previous years.
"Prices are still rising as market participants try to reconcile the growing slowdown in private starts with long-term requirements, but overall, this is positive news for construction costs," he said. "In light of this, construction companies must prioritize investment in their existing workforce as recruiting skilled workers is increasingly challenging."
Construction employment is up in more than two-thirds of metro areas in the last year, but there are still a reported 400,000 job openings nationwide.
"This suggests that many more cities would have experienced employment increases if enough qualified workers were available," Brussow said.