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Frequently conversations regarding construction cost these days contain the phrase – “How much higher can it go?”
It does seem as if we’ve reached an inflection point – ENR BCI has hovered at its high point for a while now and is showing indications of a reduction in monthly escalation, the Architectural billings index, a good indicator of future workload, while still strong is declining, and the overall economy as measured by the CPI is showing indications of a reduction in the rate of cost increases.
How high can construction costs go? Construction is a flexible market – owners have many choices when facing a construction project, between increasing or reducing the project size, or cancelling the project altogether. It does appear that the current 14% annualized rate of cost increase is pushing owners to solve problems in other ways than construction. And it also seems that this, along with modest reductions in energy costs, adaptation to the supply constraints, and a slight trend down for the US CPI, is helping to moderate construction cost increases.