US Construction Costs to Keep Rising

March 17, 2015 Laura McDaniel

JLL recently released the 2015 Q1 Construction perspective that detailed why construction costs are rising and the impact to individual industries and markets. Globe Street spoke with Todd Burns to learn more about the rising costs. See the interview below.

 

Todd Burns of JLL

CHICAGO—The economic clouds may be lifting, and construction cranes have appeared over the skylines of many cities, but the increasing demand for new commercial construction has also led to rising costs, making profitability tricky in the coming years, according to a new JLL report on US non-residential construction.

“Raw material and labor costs are making it more expensive to get out of the ground than ever before,” Todd Burns, president, JLL project and development services, Americas, tells GlobeSt.com. “You have to consider the bottom line of every project to make sure it makes economic sense short- and long-term.” But since labor costs should keep rising for several years, JLL frequently advises clients to “get projects in the ground now instead of waiting.”

2015 will be a big year for new construction. JLL cites the latest construction forecast from the American Institute of Architects, which projects that spending on non-residential construction will rise 7.7% in every commercial property sector this year. Furthermore, the backlog in non-residential construction hit a post-downturn high of 8.8 months in the third quarter of 2014.

Burns, however, does not fear that developers will create a glut by overbuilding. “We’re not close to where we were during the boom,” and that is partly the result of self-imposed discipline. “No one wants to expand the way they did in ’07 and ’08.”

Read the entire article here.

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