Dive Brief:
- The Turner Building Cost Index, a measure of cost in the U.S. nonresidential construction market, increased to a value of 1311 in the third quarter of 2022, marking a 2.18% increase from the second quarter and an 8.62% increase year over year.
- The report, released by New York City-based Turner Construction, found that the industry is experiencing a thriving market with numerous megaprojects in the works. Nonetheless, costs continue to rise.
- The skilled labor shortage allows contractors to be selective in projects they pursue, said Attilo Rivetti, Turner vice president, in a release. Wages have risen to attract more labor into the industry and to incentivize more workers to travel for projects.
Dive Insight:
Long lead times for materials also make bidding a challenge. Rivetti shared the broad philosophy that Turner, the largest builder in the U.S. by revenue, uses to remain competitive.
“A focused and strategic approach to procurement that engages contractors, designers, suppliers, manufacturers and clients reduces the risk of price escalation and produces the most competitive results for our clients,” Rivetti said.
Construction unemployment is down — meaning the vast majority of skilled, experienced workers have jobs. That will only continue to keep costs high, according to Anirban Basu, chief economist at Associated Builders and Contractors.
A hot job market means workers can bargain for higher wages. That in part may prompt Federal Reserve policymakers to aggressively tighten interest rates further. If that continues, the recovery in nonresidential activity would likely buckle, Basu said.
Nevertheless, the outlook is generally stable, as backlog remains steady and contractors anticipate rising sales, employment and profit margins over the next half year, Basu said.
