I would be very curious to hear what everyone's experience has been with construction cost pricing over the past 12 months or so.
Commodities and raw materials pricing has plummeted, along with oil. Our group expected to see significant corresponding drops in pricing, but haven't. Pricing continues to rise, and we're getting smoked by certain trades, especially curtainwall and excavation. Other trade values certainly aren't going down. Our contractors claim that most of the overall price increase is attributable to labor shortages in our market--ie, subs are busy and are being more selective. Are you guys seeing the same thing across the country? It seems counter intuitive that we are not receiving the benefit of negative cost swings in the market.
Also, this pricing info includes actual bids, not just precon services.
We're seeing similar phenomena. I think when you consider how many people left the construction industry in '08 and we're never replaced and combine that with the building booms in most major metros; you're looking at some expensive labor. I saw a stat in the Economist last year that said something to the effect, that for every five electricians that retire, there is only one new electrician to take their place. Pretty crazy.
No price reduction here either. Construction costs keep skyrocketing. We've seen declining craftsmanship too. Very hard to find someone on a job hanging sheetrock who has even hung sheetrock before and if you don't pay top dollar they'll walk across the street for $.50 an hour more.
We are seeing the exact same thing you have described. Like you said it is mostly due to the fact that the subs have lots of work lined up and have no reason to be over competitive on their bids. Random subs have come crawling out of the woodwork as well. We are seeing subs from the SE bidding on projects in Denver and Salt Lake City.
2012 multifamily development in Denver approximately $150k per door all in.
Late 2015 multifamily development in Denver approximately $240k per door all in.
Those two projects are in different municipalities so impact fees, permits, etc. vary but the majority of the difference in cost is driven by increased construction costs. Either way this delta in a short period of time is staggering, and not just limited to a few markets either.
Confirming what everyone is saying. Unfortunately the cost of raw materials and commodities don't pass through to the developers due to insanely high demand for the finished goods (construction materials) and contractors. In NYC we have seen construction costs increase 20%+ in the past 12 months.
Everyone's back log is still pretty healthy but from speaking to a few regional guys they have noticed that they have not booked as many projects this quarter as they had hoped. Labor is very hard to find. Who knows what will happen in 12 - 18 months though
Edit: to clarify this is for office developments
Major coastal market here - moderate increase over the past 12 months, call it 5-7%. The cost for land is pretty killer also.
Excluding land I've see bids @ ~$500 - 600 per buildable sq ft.
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