Dive Brief:

• Rising construction costs will dampen profits on commercial building projects this year, a Jones Lang LaSalle executive predicted this week.

• Strong demand for leases is keeping commercial contractors busy, but the cost of raw materials and labor is making that building expensive, Todd Burns, the real estate investment firm’s president of project and development services, wrote on REJournals.com. “Demand is exploding, but demand isn’t everything,” he wrote. “You have to consider the bottom line of every project to make sure it makes economic sense short- and long-term.”

• He pointed to the American Institute of Architects’ Consensus Construction Forecast, which projected that spending on non-residential construction will rise by 7.7% across commercial property sectors this year.

Dive Insight:

The price of building materials is likely to settle a bit by the end of the year, but the same can’t be said for labor costs. And the more expensive it is to hire skilled trades for jobs, the more expensive construction projects will become. The result could be a continued slowdown of construction activity, especially in states with the highest labor costs, like New York and New Jersey.