Construction firms are reeling from snowballing costs of building materials due to spiking demand and supply chain snarls that are resulting in massive budget cost overruns.
This is especially affecting construction businesses that are managing apartment or commercial projects. These cost overruns are imperiling profits — and risking red ink — on the projects after the contractors won carefully constructed bids.
Building materials and labor costs are going through the roof. According to the U.S. Census Bureau, construction costs spiked 17.5% year-over-year from 2020 to 2021, the largest increase in this data from year to year since 1970. And 2021’s costs were more than 23% higher than pre-COVID-19 pandemic 2019.
Many of the materials used in the construction of apartment and commercial buildings, including concrete, flat glass and steel products, are affected by volatile prices, with steel seeing a more than 123% increase in costs in the past year.
On top of that, labor costs have also risen due to a skilled labor shortage in the construction industry. Spiking Materials Costs Imperil Apartment, Commercial Projects