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Construction escalation forecast report and analysis for key U.S. locations and materials developed by Skanska USA Building's Project Planning Group.
Construction Market Trends
Fall 2022
01. Introduction
02. Pricing
03. Forecast map
04. Supply chain
05. Construction/Labor
06. Materials
07. Contact us
Download Report
08. Webinar Series
Webinar Series
Community Foundation Of Middle Tennessee, Nashville, Tennessee
While many see the negative growth of our Gross Domestic Product as proof of a recession, Q1 and Q2 were only two percent less than 2021—a year that saw three of its four quarters eclipse six percent growth. Two trends that are more pronounced and persistent are higher construction costs and the volatility in our supply chains. Though Engineering News-Record’s (ENR) Building Cost Index has recorded three consecutive nearly flat months, most local markets are still seeing rising costs with massive investments being made in big tech, life science and public sector projects. However, the Federal Reserve’s aggressive tactics to curb inflation by raising interest rates is starting to have an impact on growth. With money more expensive to borrow, many projects appear less viable. The recent decline in housing starts and the first decline in the average sale price of a home is evidence of this sentiment. Higher costs are also impacting development projects with strict return guidelines, as deals are not meeting proforma requirements.
Mitigating Risks
How and When Will Our Industry Feel This Recession?
Continue to forecast escalation at a cautious level. We are currently recommending six to eight percent/annum for the next 6-12 months.
Some regional markets could feel recessionary pressures sooner or more significantly than others. Monitor project volumes in your area and move quickly with projects should the opportunity for capacity present itself.
Using our insights on the supply chain, continue to plan for the early procurement of long lead, critical path items such as HVAC equipment, electrical gear, generators, below grade drainage pipe, and high purity stainless steel process piping.
To read the detailed remarks about supply chain challenges, download the full report.
As many large businesses announce measures to curtail costs, overall demand will likely contract and we expect to see the pace of cost escalation decline and possibly normalize later in 2023. In the near term, the activity that exists in the aforementioned sectors makes the probability of any significant cost decrease and long-lead supply chain improvements unlikely in Q4 2022 or Q1 2023.
Fall 2022 Construction Pricing Snapshot
13,173
Current Construction Industries Index
+0.5%
Change from previous quarter
Past one-year trend
Construction Index
$3.70
Current fuel price ($/gallon)
-6.9%
Fuel
$79.49
Current oil price ($/barrel)
-24.8%
Oil
$172
Current cement price ($ per CY)
-1.4%
Portland Cement
$1,721
Current standard plate price ($ per net ton)
-5.0%
Steel - Standard Plate
$1,241
Current plywood price ($ per MSF)
-2.0%
Plywood
$617
Current asphalt PG 58 ($ per ton)
+0.2%
Asphalt PG 58
Asphalt
Steel
Cement
Materials Index
Click an index or material to view details
+5.7%
12-month change
+36.1%
-1.0%
+8.0%
+14.9%
+5.9%
+16.5%
5,888
Current material price index
+0.9%
+19.4%
7,958
Building Cost Index
+0.8%
+10.3%
Source: Engineering News-Record
Source: U.S. Energy Information and Administration
Source: Bloomberg
Source: SteelBenchmarker
4,933
+11.2%
+37.6%
Change from previous year
12,465
7,214
+2.9%
+4.9%
+8.4%
+14.5%
$3.18
Current Fuel price ($/gallon)
+45.4%
$75.03
+2.1%
+86.5%
$150.10
-0.3%
+1.5%
$1,707
+15.3%
+178.9%
$1,253.95
-5.1%
+64.5%
$453.61
+2.0%
+15.8%
More Material Insights
Forecasting Local 2022 Construction Costs Across the U.S.
Miami/Ft. Lauderdale
Seattle
Portland
Orlando
Tampa
New Jersey
New York
Boston
Phoenix
Philadelphia
Washington D.C.
North Carolina/ Virginia
Cincinnati
Atlanta
Nashville
Houston
Dallas
San Antonio
Los Angeles
San Francisco
Click on the map locations to see construction forecast details for a specific city or region.
Phoenix, AZ
The greater Phoenix marketplace has been very busy particularly in the data center market, but also in the hospitality, multifamily, manufacturing and distribution sectors. The biggest challenges in the marketplace are sufficiently staffing the projects due to the busy labor market and the long lead times that exist on mechanical and electrical products due to supply chain issues. We would anticipate the market remaining strong for the next 18-24 months with demand keeping prices high but escalation not continuing at the same double digit annual pace that it has been in the past 24 months.
Want to discuss the local market position and forecast? Connect with Tom Feeney, Vice President of Preconstruction.
Local Labor Market Challenges Impact Pricing
Cincinnati, OH
Construction demand will remain strong for the foreseeable future. There are sizable projects on the horizon that will stretch an already tight labor market. While we have seen some relief as it relates to material escalation and lead times, we are expecting Hurricane Ian's devastation and the subsequent rebuilding to strain construction supplies. Trade partner pricing continues to rise due to increased labor costs and decreased competition as they have the ability to be very selective with the projects they pursue.
Want to discuss the local market position and forecast? Connect with Jeff Smoker, Vice President of Preconstruction in Ohio.
Construction Market Outlook Remains Strong
Want to discuss the local market position and forecast? Connect with Chris Hillyer, Senior Vice President of Preconstruction in Texas.
San Antonio, TX
No Slowdown Yet
As reported last quarter, there are several extremely large projects in the region (specifically in Austin) that are impacting the labor pool. This activity is causing a ripple effect on availability and costs with some subcontractors increasing wages and offering monthly stipends to secure a more stable workforce. August and September experienced a flattened inflation level, but it may be several months before prices stabilize. Material availability is now more predictable, but extended lead times, particularly in the electrical space, continue to impact procurement efforts.
Dallas, TX
Want to discuss the local market position and forecast? Connect with Linh Le, Vice President of Preconstruction in Texas.
North Texas Market Moves Forward
Local Construction Cost Forecast
The Dallas-Fort Worth market continues to be very busy. With 147 hotel projects and nearly 18,000 new rooms in the pipeline, our region matches Atlanta as the top hotel-building market according to Lodging Econometrics. The Dallas City council has also approved plans for a new 2.5 million-SF, $2 billion convention center. The higher education sector continues to be active with TAMU, TCU, UNT, UTA and other universities adding to their campuses to keep up with our rising population.
Atlanta, GA
Material prices and lead times continue to increase each month in Georgia as they are around the country. The latest challenge in the market has been mechanical and electrical equipment lead times. Possible solutions are to explore alternate equipment manufacturers as well as resizing equipment to more standard or readily available sizes. Despite raw material steel pricing showing some decline, local pricing for steel remains high and an area of concern for projects.
Want to discuss the local market position and forecast? Connect with Dane Wooley, Preconstruction Director in Atlanta.
Longer Mechanical and Electrical Equipment Lead Times Continue
Houston, TX
Houston Is Still Busy
Houston continues to grow with significant construction activity in all sectors including healthcare, hospitality, oil and gas, higher education and K-12. The commercial mixed-used sector is especially hot with more than six million-SF of projects either under construction or in the planning stages.
Nashville, TN
Want to discuss the local market position and forecast? Connect with Adam Hicks, Vice President of Preconstruction in Nashville.
Labor Demand Reaching New Levels in Nashville
Los Angeles, CA
A variety of challenging economic conditions haven’t caused a notable change in contractor pricing behavior. Ongoing large aviation and transportation-related programs, as well as solid demand for mixed-use residential and student housing, continue to underpin the L.A. construction market. Building, material and labor costs are 30-40 percent higher than the national average. One positive trend note, ENR’s Los Angeles Building Cost Index (BCI) in September 2022 shows that local costs were up 9.6 percent on average compared to 11.9 percent nationally.
Want to discuss the local market position and forecast? Connect with Darrell Torres, Senior Preconstruction Director in Los Angeles.
Pressure on Project Pricing and Budgets Persists
San Francisco, CA
Challenged by the market conditions, clients are requiring extra time to make decisions as they are under pressure to reallocate funds to stay within budget. The skilled labor market is tight, particularly in millwork, rebar, fire protection, miscellaneous metals and drywall. With backlogs stretching through 2023, they are more selective when choosing projects. We are continuing to recommend above average cost escalation in current estimates and lead times on MEP equipment continue to be a concern. DGS California Construction Cost Index (CCCI) is projected to be at 9.3 percent by the end of 2022 compared to 13.4 percent in 2021.
Optimistic Prospects With Some Warninig Signs
Portland, OR
Although we were burned last year by a fall lull in cost escalation, this year's conditions seem to be more conducive to a continued slowing instead of another winter price spike. More general contractors are participating in prebid walks and subcontractor response to bids has been stronger. A November vote regarding Portland city governance may instill optimism in a new chapter for businesses downtown or extend the continuing challenge to get back to a pre-pandemic business climate.
Want to discuss the local market position and forecast? Connect with Steve Clem, Regional Senior Vice President of Preconstruction in Portland.
The Wild Escalation Ride Might Be Coming to an End
Seattle, WA
With Amazon reassessing their future needs in Bellevue and Microsoft confirming they won’t renew their leases on several large office complexes, other significant projects are now on hold. Tighter financing requirements have also hindered new projects. While our subcontractor community are currently very busy, they are eager to replace this lost work. Though we aren’t seeing costs change significantly at this time, we do expect fee levels to drop.
Want to discuss the local market position and forecast? Connect with Alan Dunbar, Regional Senior Vice President of Preconstruction in Seattle.
Some Slowdown on Future Projects
Tampa, FL
While the residential housing market has begun to slow since the Fed increased interest rates to curb inflation, it remains one of the hottest in the country. Though this growth has fueled our local economy, it has also strained the supply of skilled workers in all sectors. As the state recovers from Hurricane Ian, we anticipate additional material shortages in many construction materials—especially roofing, lumber and drywall.
Hurricane Ian and Cooling Residential Market
Labor continues to drive pricing across all market sectors. Subcontractors are still very selective about the projects they're willing to pursue. Concrete and grout materials remain on allocation and are not always available at the quantities ordered. While lead times for some materails such as roofing insulation and metal bar joists have started to normalize, some mechanical and electrical equipment continue to have very long lead times.
Want to discuss the local market position and forecast? Connect with Tom Stickrod, Vice President of Preconstruction in South Florida.
The Labor Market Remains Tight as Demand Stays Strong
North Carolina/Virginia
Though long lead times for some materials present ongoing challenges, costs are returning to slightly higher than pre-pandemic levels. Trade contractors are facing pressure to increase wages to secure qualified workers in a limited labor market, creating a selective bidding environment for many key trades including electrical and drywall. Projects with particularly aggressive schedules are viewed unfavorably by trade partners due to the additional risk, resulting in additional cost premiums. Despite the challenges over the last 18 months, optimism is growing as large projects, particularly including life sciences and manufacturing, continue to advance.
Want to discuss the local market position and forecast? Connect with Will Senner, Vice President of Preconstruction in North Carolina and Virginia.
Life Sciences and Manufacturing Sectors Increase Optimism
Washington, D.C.
While the D.C. market is challenged by a strained supply chain and increased construction costs, several markets are moving forward. Multi-family residential projects are one example. Other growing markets include industrial, institutional, healthcare and educational facilities. Commercial office space is being cautiously evaluated due to the massive retreat from the office and the main concern for the local labor force is not so much quantity, but quality. The good news is that we do see cost escalation slowing down amid ongoing financial uncertainty.
Want to discuss the local market position and forecast? Connect with Apryl Webb, Vice President of Preconstruction, Washington, D.C.
D.C. Construction Spending Climbing in 2023 Despite Ongoing Economic Uncertainty
Philadelphia, PA
Our local labor is eager to build on their backlog of work as the threat of a slow down is a consistent concern. We are seeing a high demand for new data centers and infrastructure projects, and after a two-year pause, life sciences and healthcare is heating up and gaining momentum. Higher education continues to find their way through new ways of learning and their true spatial requirements. New major projects on the horizon include a major new expansion for Cooper University Medical and a new NBA arena downtown.
Want to discuss the local market position and forecast? Connect with James Lane, Vice President of Preconstruction in Philadelphia.
Philadelphia Metro Continues to Thrive with New Infrastructure and Cultural Projects
New York, NY
Want to discuss the local market position and forecast? Connect with John Tamborino, Vice President of Preconstruction, Metro New York/New Jersey.
Life Sciences and Healthcare Sectors Grow at Brisk Pace
New York continues to experience material cost increases and supply chain issues with glass, aluminum and major mechanical/electrical equipment. Even with these challenges, the healthcare and life sciences markets are still going strong and will contribute to a stable backlog of projects.
Want to discuss the local market position and forecast? Connect with Nick Culver, Vice President of Preconstruction, New Jersey.
New Jersey's Relentless Demand for Industrial Space Continues to Fuel Busy Economy
Next 6 months
6 months - 1 year
1 - 2 years
Vacant office spaces are being redeveloped into industrial projects throughout the state. Amazon's new 205,350-SF facility in Woodland Park and CenterPoint's 185,917-SF building for Costco in Newark were recently completed in Northern New Jersey. Central New Jersey celebrated a new 190,000-SF warehouse in North Brunswick that replaced an outdated one, with another 220,000-SF, is scheduled to be completed in Millstone this quarter. Steel, plastic, aluminum, and lumber have all seen unprecedented price escalations due to supply shortages and increased demand. Scheduling concerns, escalation clauses and reduced durations on price hold guarantees have also become the norm in subcontractor bids.
This map reflects local USA Building Project Planning Services team leaders’ opinions of market volume and capacity and is not based on published analytics or third-party forecasts.
Construction price inflation is/is expected to be above normal (3-5% per annum)
Construction price inflation is/is expected to be above n ormal (3-5% per annum)
Market is stable and construction pricing/ inflation is within traditional indices (less than 3% per annum)
Connecticut
Want to discuss the local market position and forecast? Connect with Matt Impastato, Vice President of Preconstruction.
Temperatures and Prices Are Falling
Market is experiencing significant/abnormal construction price inflation (+5% per annum)
Boston/New England
While construction within city limits is slowing due to changes in the approvals process, work beyond city limits is still growing in life sciences, higher education, residential and government —with a significant expansion in the commercial lab and pharmaceutical sectors. As a result, many subcontractors have solid backlogs for 2022 and into 2023. The material cost escalation of the summer months has returned to Q1 levels, but cooler weather and higher energy costs will put upward pressure on escalation. Delivery times for long lead items is still very challenging with some items extending the wait as much as 100 percent. Strained logistics are also disrupting delivery certainty and will continue through the end of 2022.
Want to discuss the local market position and forecast? Connect with Matt Impastato, Vice President of Preconstruction, Boston.
A Season of Change
Click on the locations below to see construction forecast details for a specific city or region.
Miami/ Ft. Lauderdale
N. Carolina/ Virginia
Orlando, FL
Want to discuss the local market position and forecast? Connect with Brian Coakley, Director of Preconstruction in Orlando.
Thousands of manufacturing facilities, factories, warehouses and distribution centers could be impacted in the months that lie ahead due to likely material supply shortages/loss, increased delivery costs and facility damage. On a positive note, healthcare, education, hospitality/entertainment and residential construction markets are thriving. The residential market, spurred by both retirees and younger homebuyers, remains strong when compared to other major markets throughout the state, but has leveled off after a steady decline. This housing trend has eased local labor shortages just as major construction projects get underway. The steady population growth of those between the ages of 24 and 54 has also improved our labor market.
Want to discuss the local market position and forecast? Connect with Mark Lewis, Preconstruction Manager in Tampa.
Hurricane Ian Will Impact Supply Chain in the Months Ahead
Nashville continues to see unprecedented growth throughout the city and surrounding counties. While this activity is positive, our subcontracting community has a significantly stretched backlog of work for the next two years. Nashville still faces a very high demand for housing due to the limited supply of apartments, but this will ease somewhat in the next year with more than 15,000 apartment units under construction and approximately 33,000 additional units in the permitting/planning phase.
Cost escalation has plateaued after above-average summer numbers. The market is still busy, and subcontractors have steady backlogs through the end of 2022. Seasonal increases related to higher energy bills will start to impact costs, and delivery times for long lead items are still significantly extended. Transportation, logistics and labor challenges are also disrupting the certainty of delivery and we anticipate this will continue through 2022.
Want to discuss the local market position and forecast? Connect with Yvan Suarez, Senior Preconstruction Director.
Want to discuss the local market position and forecast? Connect with Tom Stickrod, Vice President of Preconstruction in Tampa.
Supply Chain Trends and Insights
Status Key
Stable/Consistent
Trending Down
Fluctuating
Trending Up
Roofing supply chains are starting to recover including some relief in lead times that have been extended out to a full year. Polyiso insulation lead times are now averaging 30 weeks, down from their 52-week peak. Most membranes are running at 20 to 25 weeks and cover board material is 30 to 36 weeks. One category to watch is fasteners. Nine inch or longer fasteners can have lead times more than nine months. We will monitor this category closely for impacts associated with Hurricane Ian.
Lead Time
Price
Roofing Products
Hot Rolled Coil (HRC) pricing has dropped by 50 percent since the start of the year and structural steel pricing is just starting to drop after holding steady. Wide flange pricing is down 3.5 percent since peaking in June.
Structural Steel
Click for further analysis
Pricing for some interior materials continue to escalate, while others have stabilized. Armstrong has announced a 10 percent increase on ceiling tiles (effective October 3) sighting the high cost of natural gas as one of the main drivers. CertainTeed has also announced a 10 percent increase on ceiling tiles (effective October 20). After a quiet second quarter with no drywall increase announcements, National Gypsum announced an unspecified increase effective July 25 on their Gold Bond fire-resistant wallboard. We have not yet seen others follow. Insulation and metal stud pricing has been quiet during the third quarter.
Architectural Interiors
Read More
Lumber pricing is back down to pre-COVID levels. Both dimensional lumber and panel pricing has declined throughout 2022— 63 percent lower from the start of the year. Rising interest rates continue to cool the housing market with housing starts fluctuating between 1.4 and 1.6 million.
Wood-based Building Materials
Lab casework lead times continue to get better and are down in the 8–12-week range. Standard casework lead times can be as low as eight weeks from some manufacturers. As input material price escalations have slowed, pricing in this category has also stabilized.
Lab Casework and Fume Hoods
Demand for appliances remains high and lead times are still extended as sourcing components remains challenging. As housing starts continue to cool, it is expected that demand will soften. For the short term, lead times will remain elevated at the 16 weeks or higher.
Appliances
Both lead times and pricing are beginning to stabilize with lead times holding steady for the next six months. Prices are up eight to 20 percent year-to-date but are not expected to increase at this rate in the next 6 months. Lead times for elevators vary considerably depending on the category; low rise elevators range from 14 to 27 weeks, mid-rise elevators range from 20 to 27 weeks, high-rise elevators range from 40-48 weeks and freight/service/escalators range from 30 to 42 weeks.
Elevators, Escalators, Moving Walks
Manufacturers continue to improve their production and delivery performance of rough plumbing and finish plumbing fixtures with increased inventory levels at distribution and manufacturers. One exception to available inventory continues to be reinforced concrete. While commodity prices for steel, PVC resin and copper are down, manufacturers and distributors are maintaining or raising prices to compensate for anticipated reduction in demand. We believe copper, PVC and steel pipe prices are peaking and will begin to come down over the next three months.
Plumbing and Drainage
Demand for HVAC equipment continues to be very strong across all market sectors—especially in the semiconductor, data center, automotive and life sciences sectors. Nearly all manufacturers are struggling with supply chain delivery issues resulting in factory rescheduling and decommitting ship dates, as much as 6 months in some cases. Some of the components causing delays are semiconductors, compressors, ECMs and VFDs. Lead times for ECMs are running 70 or more weeks, and because traditional VFDs are being substituted for ECMs, VFD lead times are longer as well. Prices YTD are up 25-30 percent.
HVAC Equipment
While a global shortage of semiconductors is affecting several industries, the impact on building controls has been minimal due to mitigation efforts by controller manufacturers. Prices and lead time for materials are expected to increase moderately, however installation labor will continue to dominate price and lead time in this category.
Building Control Systems
Manufacturers continue to struggle with supply chain issues and historically high demand for electrical gear. Semiconductor shortages are severely limiting the delivery of trip units needed for solid state circuit breakers. There is also an industry-wide shortage of Switchgear and Panel lugs resulting in many manufacturers being unable to ship switchgear and panels or “short shipping” products requiring field assembly. Switchgear and switch panel lead times are running 80 weeks and are expected to increase. Transformer lead time and pricing is also increasing due to demand and iron core material cost increases. Driven in large part by data center demand and lack of investment into new factory capacity, manufacturers are not expecting lead times to improve for at least the next 24 to 36 months and are likely to degrade even further.
Electrical Gear
Lead times and pricing for several commodity electrical items are down because of declines in copper and PVC resin raw material costs. Lead times for specific items like 5kV medium voltage cable are improving—running 18-20 weeks, which is down from 30 weeks in the previous quarter. These lead times are still higher than the standard of six to eight weeks. Electrical conduit pricing and inventory have stabilized as PVC resin supply has recovered. Panel lugs are still in short supply, causing industry wide delays with all panel manufacturers.
Electrical Commodity Materials
Demand for generators continues to be very strong and shows no signs of slowing. In fact, demand for 1.2MW and above has increased in the past three months, with lead times ranging from 60 to 100 weeks. Gensets below 1.2MW are running at least 52 weeks without sound enclosures. Custom sound enclosures are also taking longer to procure with lead times at a minimum of 30 weeks. Prices continue to rise at an annual rate of 15-20 percent due to material, labor and overall demand.
Generators
Transportation costs are starting to recede after the CPI index peaked at an all-time high of 284.64 points in June. The index decreased in the last three months and now stands at 266.11. Although this decrease is a welcomed sign, it should be noted that the CPI Transportation index averaged 107.66 points from 1950 through 2022. The current index is more than double the historical average. Another welcomed sign is lower shipping container rates, dropping to under $3700 for routes from Asia to the U.S. West Coast. This reflects a decrease of more than sixty percent year over year—thought the prices are still 200 percent higher than the pre-pandemic level.
Transportation
Wood Products
Lumber pricing presented in the Supply Chain section of this report, reflects current pricing as it exits lumber mills in North America. This pricing has fallen dramatically. However, there is still higher priced inventory in the supply chain all the way through to wholesale and retail outlets. Plywood and lumber price declines at points of sale will continue to fall as inventory levels are burned off. Earlier in this report, we presented plywood price data that had not fallen off as dramatically, because it is measured at points of sale.
Steel pricing appears to be leveling off. In addition, there are some discussions starting around eliminating the Section 232 tariffs on imported steel. The Coalition of American Metal Manufacturers and Users (CAMMU) is urging the Biden Administration to eliminate the tariffs, stating that the U.S. has become an island of high-cost steel.
Drywall
Drywall pricing has escalated steeply over the last 9 months. However, the frequency of announced price increases from manufacturers has slowed in recent months. Residential building activity has slowed a bit since peaking in March but remains at a very high pace, keeping the pressure on manufacturers. Manufacturers continue to supply the market on “Allocation” or Controlled Distribution, which is stretching out lead times. Although pricing remains high, there is some evidence of stabilization but going forward will depend on housing activity. Additionally, insulation products have experienced extended lead times. This is most pronounced with mineral fiber insulation, which currently have lead times out beyond 200 days. Rockwool is opening a new facility in West Virginia this fall, which is expected to offer some relief towards the end of the year.
Petrochemicals in PVC
Petrochemical manufacturers in the Gulf Region account for 80 percent of U.S. production, and their products are primary ingredients for PVC. Over the past year, production has been disrupted by a series of complications ranging from explosions, Hurricane Laura, and most recently winter storm Uri. Ultimately, 80 percent of the petrochemical production in the U.S. was impacted. As a result, the lost production is estimated to reduce total output for 2021 by 10-12 percent. Production is ramping back up, but there are still some raw material constraints; however, most of the operational issues are expected to be mitigated by the end of April. Prices of PVC have increased rapidly as well, and large distributors have implemented price increases of around ten percent in February, followed by another five to ten percent increase in April.
Mechanical and HVAC Equipment
HVAC manufacturers are starting to see delays in the supply chain due to increased demand and workforce constraints in factories. In particular, Electronically Commutated Motor (ECM) fan manufacturers have extended lead times to 26 weeks; galvanized steel price and lead times have significantly increased; and flex conduit availability is becoming a concern.
Electrical Gear and Materials
Lead time for low voltage switchgear (less than 5kV) has extended to between 30 and 40 weeks. In some cases, capacity to generate submittals is further extending procurement lead times. Busway lead times range from 15 to 20 weeks and medium voltage switchgear lead times are between 18 and 24 weeks. Strong demand is expected to continue through the end of the year with further price increases expected because of rising manufacturing costs, including workforce constraints and rising cost of steel, aluminum and copper.
Crude oil prices have retreated from the 14-year high in March and have remained close to $100 a barrel due to weaker demand, economic slowdown fears and concern of a new wave of lockdowns in China. Transportation utilization decreased and capacity increased. Consumer demand continued to shift as inflationary pressures cut into discretionary spending. Ocean Freight: While congestion at the ports remains an issue, there is some stabilization. Freightos reports that shipping container pricing is down 50 percent in Q2 for routes from Asia to the West Coast. Rates are just below $7,500 for a shipping container and prices are currently 14 percent lower year over year. In contrast, routes from Europe to the East Coast are surging and are up 42 percent year over year. Even as pricing continues to drop, long lead times remain an issue. Sea-Intelligence reports that around two thirds of global shipment schedules are late.
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Doors and Hardware
Elevators, escalators, moving walks
Building Control systems
Electrical commodity Materials
Lead Time and Price Snapshot
Click a category to view details
Trending Up Significantly
Logistics
Roofing
Roofing materials are typically procured as a complete package to be sure that all components are compatible and to allow roofing providers to warrant the total system. We have had some success with substituting certain materials to improve delivery dates, however, this takes a coordinated effort. It is important to work hand-in-hand with the roofing material supplier, the subcontractor, the design team and the owner. Some substitutions require design modifications. For example, replacing polyISO with polystyrene will typically result in the need for a thicker insulating panel to achieve the same R-Value.
The LMI for September was 61.4. This is up slightly from the August reading, which indicates that growth is increasing in key categories of inventory, warehousing, and transportation capacity and utilization.
Door hardware and hollow metal doors lead times are improving slightly. Lead times for hollow metal doors are currently in the 7-to-10-week range. The most challenging materials continue to be on the electronic access side. Card reader lead times are still unpredictable, so a six-month lead time budget is recommended. Card reader lead times are being driven by availability of semiconductors.
With copper down from $3.76 to 3.42 per lb. (9 percent over last 30 days), copper wire prices are following, down five to 10 percent. Steel conduit is also down as much as 10 percent over the last month. Panel lug lead times for large gauge (250mcm to 1000mcm) are three to four weeks, if not in stock and prices are flat. Data center and semiconductor demand as well as automotive EV are driving the market. Resin prices are staying flat, keeping PVC conduit prices stable for now. Lead times are running about four to six weeks for large quantities with smaller quantities typically in stock. With steel dipping down about 10 percent, cost and lead time for Unistrut has improved.
The Logistics Managers Index (LMI) tracks key metrics, such as transportation, warehousing and inventory data collected monthly from industry professionals. A value less than 50 indicates a contracting market and above 50 a growing market. The LMI for June was 65.0, which indicates that growth is slowing. This number is down significantly from the 76.2 reading in March and is the third consecutive reading that has decreased. Key drivers of the LMI index decrease are warehousing prices, transportation prices and transportation utilization.
Current Status:
6-12 Month Forecast:
Special considerations:
Rockwool has announced a 15 percent increase on all mineral wool insulation products (effective May 16). Other insulation producers have been quiet so far this year. Although some costs are stabilizing, subcontractor bids are expected to remain elevated as material pricing remains at very high levels. In the longer term, a cooling housing market may offer some relief.
The key takeaway for August’s LMI of 73.8 is that transportation prices and utilization continue to grow. Peak transportation season is in full swing (with the holidays approaching), which adds pressure to a strained supply chain making relief early next year unlikely.
Ceilings, drywall, metal studs, flooring, paint, etc.
Plumbing
Lighting
Lumber pricing is driven mainly by housing starts, which were on the decline the first couple of months this year. However, starts rebounded in March to 1.725 million, but have cooled slightly to 1.572 million in May. Overall, the housing market remains very strong and most housing market analysts predict strong starts through the remainder of 2021.
The Logistics Managers Index (LMI) tracks key metrics, such as transportation, warehousing and inventory data collected monthly from industry professionals. A value less than 50 indicates a contracting market and above 50 a growing market. The average through January 2020 was 63.15, with the LMI trending down. The average from February 2020 to present is 66.31, indicating strong expansion. June-August 2021 were the highest three months since inception, with an average of 74.4, largely driven by transportation growth. The key takeaway for August’s LMI of 73.8 is that transportation prices and utilization continue to grow. Peak transportation season is in full swing (with the holidays approaching), which adds pressure to a strained supply chain making relief early next year unlikely.
Metal studs continue to escalate with Super Stud announcing a 10 percent increase as of October 1, 2021. This brings total inflation on metal studs to 100–120 percent since Fall 2020. After a quiet period for drywall pricing, new increases have been announced by many manufacturers (including USG, CTD and Nat. Gyp.) of 20 percent, effective in October. Poly ISO and polystyrene insulation also continue to escalate. Hunter (polyISO producer) has announced a 10 percent increase, effective Jan. 1, 2022. In addition, Dupont has announced a 10 percent increase on their polystyrene products, effective Oct. 1, 2021. Lead times for Rockwool’s mineral wool product is now exceeding 200 days, leading them to announce that they will continue to acknowledge new orders but will not provide delivery dates.
About Skanska's Strategic Supply Chain Team: Skanska’s Strategic Supply Chain Team leverages established relationships with major equipment and building material manufacturers to bring best value solutions to our projects and clients. Our direct relationships give us insight into the major supply chains feeding into the construction market. Since the outbreak of COVID-19, we have been working with our partners to closely monitor construction supply chain disruptions, lead times and impacts to market prices for materials and equipment.
What is LMI?
About Skanska's Strategic Supply Chain (SSC) Team: Skanska’s SSC team leverages established relationships with major equipment and building material manufacturers to bring best value solutions to our projects and clients. Our direct relationships give us insight into the major supply chains feeding into the construction market.
(Includes fixtures)
RCP lead times are a minimum of three months, and specialty items like fire hydrants are running six to 12 months. Above-grade plumbing, valve and fitting inventory and lead times are stable. Distributors are striving to increase inventory to protect against stock outs in the face of continued strong demand. The war in Ukraine has driven up the price of raw materials and energy, which has resulted in a flood of price increases on all items since the beginning of March. More than 200 manufacturers have announced price increases since the beginning of 2022 averaging 7–10 percent.
High Purity Process PVF
Due to strong demand in life sciences, healthcare and the semiconductor markets, pricing and lead times continue to increase. While it varies depending on the material/equipment, the trend is still moving up across the board. Lead times for A269 SMLS Tube is running 24-26 weeks from the mills.
High Purity Process Pipe, Valves and Fittings (PVF)
Lead times described are after fully approved submittals and factory accepted release
Many companies have announced insulation price increases: Johns Manville (25 percent on mineral wool products effective May 1), Rockwool (going from 12 percent on April 1 to 15 percent on May 16 for mineral wool product), Hunter (12 percent on polyiso insulation effective February 1), DuPont (8 percent on extruded polystyrene [XPS] effective Jan 4). The most significant lead time continues to be with polyiso, which remains in the 48-52 week range.
Despite the current level of economic uncertainty, we are optimistic that many material categories have peaked and are predicting lower costs and shorter lead times. One notable exception is mechanical and electrical equipment. As demand dramatically outpaces supply, we forecast continued price escalation and growing lead times for these two categories.
Most manufacturers point to stronger raw materials supply chains as the key driver behind the recovery. A healthier resin supply is one example. After Hurricane Ida caused a major disruption to petrochemical processing in August 2021, resin supplies were hit hard. PVC pipe manufacturers can now get the resin supplies they need and pricing for these raw materials are trending downward.
New housing starts and Hurricane Ian’s supply chain impact are key focus areas. Historically low inventory may be the cause for new housing starts not decreasing as much as expected from rising mortgage rates. Since many homeowners secured record-low refinance interest rates in 2020 and 2021, there is little incentive to place their homes on the market and buy at higher rates. As a result, the need for new homes may remain higher than expected but will certainly decline.
It is still too early to assess Ian’s impact on the supply chain as Southwest Florida is still rebounding. Direct challenges to building material manufacturers should be minimal compared to Hurricane Ida. One thing is clear, Florida’s already strained construction labor market will become even tighter due to intensive cleanup and rebuilding efforts.
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U.S. Construction Employment
Construction employment increased by 19,000 in September 2022, in line with average monthly job growth for the first eight months of the year. Construction unemployment dropped to 3.4 percent, below the national rate of 3.5 percent for all industries. ABC Chief Economist Anirban Basu claims the “hot jobs” report is actually terrible for the construction industry which is already operating at capacity. Average hourly earnings have increased to $35.04 as of September, up from $34.67 in June.
Architecture Billings Index
Hover over the chart to see exact figures
This Architecture Billings Index (ABI) demonstrates whether or not architectural firms are billing for or signing new design contracts. The construction industry feels the impact of this index with a 9-to-12-month lag time.
In September, the Architecture Billings index (ABI) reported a score of 51.7, a slight dip from 53.3 in August. Client inquiries into new projects and the value of design contracts recorded their lower post-pandemic growth rates in September. The strongest conditions were reported by firms in the Northeast and Midwest, but multi-family residential and commercial/industrial sectors across the country saw their billings decline in September.
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Decrease in volume
Increase in volume
Neutral
Scoring:
Skilled Labor Index and Common Labor Index
The ENR Skilled Labor and Common Labor indices measure growth in union wages for select trades. For the five-year period of 2016 to 2021, the Skilled Labor index saw annualized growth of 2.1 percent. Since September of 2021, that has spiked to a present annual increase of 3.8 percent. While attempts to slow inflation continue, many market sectors continue to bring large projects to market, increasing demand for an already strained labor pool, driving up wages and increasing competition for skilled labor.
Construction Starts and Dodge Momentum Index
While construction starts decreased 19 percent in September, year-to-date construction was 16 percent higher in the first nine months of 2022 compared to the same period in 2021. Non-residential building starts rose 37 percent over the year but are down 23 percent from August to September.
Construction, Architecture and Labor Indices
Spending
Employment
Labor
Source: U.S. Bureau of Labor Statistics
Source: U.S. Census Bureau and Dodge Data & Analytics
Architecture
Source: AIA
Click on the chart to see exact figures
Construction Spending and Dodge Momentum Index
Construction, Architecture and Labor Indices
September ABI Report
September’s decline in construction starts should not be seen as a precursor to a cyclical pullback in the industry…the decline in September returns starts activity to its trend level. It is likely, however, that as interest rates move higher in the coming months, marginal construction projects may not get underway and construction activity will begin to settle back.
Richard Branch, Chief Economist Dodge Construction Network
Construction Materials and Commodities Pricing
Despite continued concerns about a recession, construction materials’ cost, labor availability, the stretched supply chain and delivery of products to jobsites remain the biggest challenges facing construction. Interest rates are affecting some sectors, but other sectors are pushing past cost and supply chain challenges, keeping overall material pricing high.
Piping
Lumber and Wood
Metals
Oil, Gas and Fuel
Drywall, Gypsum and Insulation
Concrete and Cement
Pipe Producer Price Index
Polyvinyl Chloride (PVC) Pipe Average prices rose only one percent since last quarter. Copper Pipe Average pipe prices increased three percent since last quarter. Carbon Steel Pipe Carbon steel prices declined five percent since last quarter.
After hitting a record high average of $5.02/gallon for regular unleaded gasoline in mid-June, average prices have receded modestly to a national average in October of $3.70/gallon. Experts report that fuel pricing is largely speculative and reactive to economic indicators. If continued inflationary fears persist and traders remain concerned about a period of recession, the price of oil will likely continue to slide and fuel prices along with it. If demand powers through the recession and the sanctions remain in effect against Russia, fuel prices could climb even higher.
Aluminum Aluminum prices continued to trend downward from the March record high. There may be some pressure on the price in the upcoming months as production decreases due to high energy costs as well as a potential tariff on aluminum from Russia—the second largest producer.
Zinc Zinc prices have risen slightly as supply remains low but have not fully rebounded as recession fears have kept the price muted. Top producers in Europe have taken production offline because of high energy costs.
Nickel Nickel prices have remained near the July low as top producer Indonesia has increased production, and the global supply of nickel may see a small surplus.
Copper Recession fears have continued to keep the price of copper down–around 20 percent from January. There is some concern over future supply with top producer Chile shutting down one of its mines, but for now prices are estimated to remain relatively stable.
Lumber and Wood Products
Lumber pricing continued its downward march. Pricing has now reached pre-pandemic levels and is down 63 percent since it peaked in March 2022.
Structural Steel Shapes and Rolled Bars
Pricing for structural steel, wide flange and steel plates is declining. Pricing for hollow sections has been much more volatile but are currently down 33 percent after peaking much earlier in the year.
Asphalt Product Pricing
While asphalt pricing indices remain at an all-time high, some leveling has occurred the past two months as petroleum pricing levels have receded. As previously mentioned, the asphalt industry usually lags the petroleum industry in its pricing levels.
Gypsum, Drywall and Insulation
Drywall, metal stud and insulation price increase announcements have continued to be quiet during the third quarter. This may change once rebuilding starts in Florida in the wake of Hurricane Ian. It’s too early to say what the impact will be on building materials as efforts so far have been focused on cleanup and getting roads and other transportation arteries back into operating condition.
Click the icons to view interactive one-year index or pricing trends.
Source: U.S. Energy Information Administration
Source: U.S. Bureau of Labor Statistics PPI
Source: Engineering News-Record and U.S. Bureau of Labor Statistics PPI
Source: Kitco
This chart shows a one-year trend of pipe producer price index. Polyvinyl Chloride (PVC) Pipe Average prices continue to rise, up eight percent since Hurricane Ida struck the Gulf Coast in August and up 48 percent year-to-date. Copper Pipe While raw copper costs have stabilized, the price of copper pipe continues to increase, up more than 32 percent since January 2021. Carbon Steel Pipe Average cost of carbon pipe is also up more than 60 percent year-to-date due to increased costs of raw material and transportation.
This graph shows a one-year trend of key metals by price per pound (lb).
This graph shows a one-year trend of key lumber and wood products in terms of producer price index.
Paving Asphalt PG 58 is a Performance Graded (PG) asphalt derived from specially selected crude oils via carefully controlled refining processes. Paving Asphalt PG 58 product is recommended for road construction. Asphalt WPU058102 represents the Producer Price Index of Asphalt and Other Petroleum and Coal Products reported by the U.S. Bureau of Labor Statistics.
This chart shows a one-year trend of pipe producer price index.
Cement supplies remain tight and allocation to ready mix suppliers remains in place in many markets. Tight supply lines are expected to remain through the balance of 2022. It is anticipated that continued slowing in the housing market and a seasonal slowdown in demand over the winter months will allow manufacturers to catch up. The relatively mild winter experienced last year meant that demand remained elevated. What winter of 2022 will bring remains to be seen.
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