Construction Cost Insights for Q3 2024
Every quarter, Gordian lends its expertise to the Construction Cost Insights Report. Produced in partnership with Building Design+Construction, the report features market observations and analysis from industry leaders, based on their experiences and Gordian’s RSMeans™ Data construction cost database. The industry standard for cost accuracy, RSMeans Data contains over 92,000 unit line items comprised of material, labor and equipment prices localized to 970+ locations. Available digitally and in print, this data is backed by more than 30,000 hours of research every year.
We recently published the latest Construction Cost Insights Report, covering Q3 of 2024. Here are three stories you need to know as the calendar turns from summer to fall.
Construction Materials Market Largely Stable
Broadly speaking, construction costs held firm between Q2 and Q3 of 2024. This stability is a boon for contractors, architects and executives, as they can more accurately budget, design and estimate projects. However, the calm bird’s eye view of the materials market is contradicted at the ground level, where volatility has shaken a few specific sectors.
One such sector is the steel market. Structural steel prices are in the midst of a sharp decline, with prices per ton decreasing almost 10% over the last three months and acutely dropping in the Rocky Mountain states. Industry experts anticipate the slide will continue. Gordian’s cost engineers concur but suggest steel costs will fall slower as the year winds to a close.
In contrast, plywood sheathing, pressure-treated decking and other lumber costs have climbed for two straight quarters, leading to an uptick in overall construction costs across Canada. Gordian’s experts believe these rising prices will continue and we will end the year with an increase in overall building costs.
The Construction Supply Chain Goes High Tech
The Q3 Construction Costs Insights Report outlines several technological advancements designed to optimize the construction supply chain and material management. On the forefront of the construction industry’s technological revolution is artificial intelligence (AI). While AI’s current use in the industry is hampered by ill-equipped data management systems, it has the potential to fuel real-time supply chain decisions and optimize resource allocation. While AI is enabling split-second analysis based on data, some firms are using drones to film construction progress and monitor material use to identify and prevent supply deficiencies.
As these technologies continue to evolve, the world of construction will evolve with it. From the back office to the job site, tomorrow’s projects will look worlds different from today’s.
Global Events Make Their Mark on Construction Costs
The world doesn’t turn in isolation. Wars, elections, economic depressions and other domestic events in one country can make an impact that crosses oceans and transcends borders. The construction materials market is currently subject to the changing tides of several international events.
In Central America, drought conditions have eased in the Panama Canal. Booking slots have improved in response and 35 boats per day are now entering the canal, a near-normal level. Yet, the cost of traversing some Red Sea container routes has exploded to $10,000 per container due to Houthi attacks. These attacks have reduced shipping volume through the Suez Canal, impacting between 10% and 15% of world trade.
Sanctions on Russia following the invasion of Ukraine have created supply chain constraints across many material sectors. Rising U.S. tensions with China, Russia and Iran have resulted in additional tariffs on building materials and greater pressure on prices.
Finally, West Coast freight facilities in the U.S. are handling extra volume in anticipation of a strike by Canadian rail workers. These are merely three examples of the geopolitical costs shaping the construction materials market.
A Complex Interplay of Challenges and Opportunities
Overall in Q3, the construction cost market is a mixed bag. Overall, costs are stable. Sector-specific trends like the steep decline in steel prices, on the other hand, highlight the importance of strategic adaptability. The changing geopolitical landscape is leaving its fingerprints on the industry and savvy executives are using technology to make better decisions more quickly.
By staying informed and adaptable, industry leaders can navigate the complexities of the moment and position themselves for success in a rapidly-evolving environment.
