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Construction Costs Fall for First Time in a Decade

The nature of the coronavirus pandemic has created a uniquely challenging set of circumstances for designers, architects, and contractors. And interestingly, according to the , a metric for nonresidential construction, construction costs have fallen 1.01% from the first to the second quarter of 2020. While perhaps insignificant out of context, that decline marks the first time since Q2 of 2010 that the Building Cost Index fell from one quarter to the next.

ag棋牌地址Practically speaking, that decline means a greater number of firms are competing for each available construction project, which drives prices down. The decline also affirms existing indicators like the American Institute of Architects’ Architecture Billings Index, which shows that A&D businesses have in the months since the pandemic hit U.S. soil.

At the same time that construction firms are getting paid less for the business they do win, material prices are continuing to rise due to the global supply chain’s widespread disruptions. According to trade group Associated Builders and Contractors (ABC), which analyzed the U.S. Bureau of Labor Statistics’ Producer Price Index, construction price inputs rose 2.2% in June, marking the second straight month of increases. While those increases were largely dictated by energy costs, as crude petroleum shot up 71.9% from May to June, softwood lumber also became 11% more expensive.

ag棋牌地址Parsing the material costs further yields some outliers, however. Plumbing fixtures and fittings fell in price month over month in June, for example. More broadly, construction inputs are still down 3.4% from where they were in June of 2019. Still, any eventual decline in these input prices may not be enough to compensate for broader challenges. A June by ABC found that 39.4% of contractors expect their profit margins to decline over the next six months, with 21.6% subsequently expecting they’ll have to decrease staffing levels to some extent.