Q2 2022 Economic Indicators
In continuing our theme from our 1st Quarter 2022 EI Report, inflation is every owner’s primary concern. As we continue to study trends, we came across an excellent report published by CBRE titled, 2022 US Construction Cost Trends. The newsletter offered several interesting observations and predictions:
- The CBRE new Construction Cost Index predicts a 14.1% year-over-year increase in construction costs by year-end 2022 as labor and material continue to rise in cost.
- Inflation in materials is expected to start to cool toward the end of 2022 and normalize between 2-4% during 2023-24. However, specific supply chain issues and other geo-political risks will continue to cause spikes in some products.
- Labor will continue to be a challenge as we have four significant trends colliding: a dramatically smaller talent pool resulting from the great recession, an aging industry workforce with 20% of our workers being 55+, the lowest national labor force participation rate ever experienced in the US, and a rise in competition for people from other growing industries such as logistics.
This information shared by CBRE fits precisely with what Miles-McClellan is experiencing as we continue bid projects. Below are three specific examples supporting the above analysis, where we bid either an entire project or a particular product 2 separate times in a short timeframe:
- During the first quarter of 2022, we had the opportunity to bid on a school HVAC renovation project twice. The owner experienced a 9% increase in total project cost over that short 90-day period.
- Between the fourth quarter of 2021 and the second quarter of 2022, we bid on an office building renovation/addition project two times, experiencing a 6% increase in total construction costs over 7 months.
- Lastly, we bid on an operable wall package twice during a 5-month window between December 2021 and April 2022. This owner experienced a 90% spike in price without any change to the scope or material of work.
Our goal is to inform you, our clients, of current construction trends. We will continue to monitor information being predicted industrywide and share specific cost data that Miles-McClellan experiences as we navigate our changing economy.