Is Construction Cost Inflation Finally Over?

The latest research from Rider Levett Bucknall suggests a gradual slowdown in the rise of construction costs. The report indicates a 1.29 percent increase in the first quarter of 2024, with a year-over-year growth of 5.85 percent. Although the growth rate has been ascending, the current quarterly increase matches pre-pandemic levels from 2019. Year-over-year growth also slightly surpasses figures from five years ago.

Regional Disparities

In comparison to the national average, cities like Chicago, Seattle, Portland, and Las Vegas experienced higher annual percentage increases. Chicago led with an 8.59 percent rise, followed by Seattle at 7.07 percent, Portland at 6.68 percent, and Las Vegas at 6.07 percent. Other cities, such as Denver, New York, and Los Angeles, had lower year-over-year increases, with San Francisco recording the smallest rise at 3.98 percent.

Industry Outlook

Paul Brussow, RLB North America's president, expressed cautious optimism for the construction industry. Despite the uncertainties since 2020, the latest data suggests a promising future. The construction unemployment rate remained at 4.4 percent in the fourth quarter of 2023, urging companies to invest in their existing workforce due to the growing difficulty in finding skilled labor. Although employment increased in most metro areas, there are still 400,000 construction job openings nationwide.

Future Prospects

Looking ahead, RLB anticipates a positive outlook for the industry. The decreasing trend in construction material costs is expected to alleviate pressure throughout 2024. Additionally, public funding for manufacturing and infrastructure projects is forecasted to drive industry growth, offsetting the expected decline in privately financed developments.