Mark your calendars for the ultimate real estate experiences with Inman’s upcoming events! Dive into the future at Connect Miami, immerse in luxury at Luxury Connect, and converge with industry leaders at Inman Connect Las Vegas. Discover more and join the industry’s best at inman.com/events.
Builders should plan for construction costs to increase throughout 2024 due to a variety of factors, according to a new study released Tuesday by cost management firm Currie and Brown.
Following a construction cost increase of 4 percent in 2023, Currie and Brown is projecting building costs to rise between 3 percent and 6 percent in 2024, with builders in different markets facing differing cost increases.
Builders in Chicago, for instance, should expect costs to rise only 3.5 percent for the year, while construction companies in Phoenix, which has undergone a development boom since the pandemic, should brace for cost increases of 6 percent. That means a project that cost $10 million to build in 2023 would cost $10.6 million to build in Phoenix this year and $10.35 million in Chicago, according to the report released on Tuesday.
Behind the continued price increases are a number of factors, including geopolitical turmoil, which has added further uncertainty to the United States economy and questions around the Federal Reserve’s decisions surrounding interest rates, continued inflation on construction materials and tightening sustainability regulations such as the The Climate Corporate Data Accountability Act in California.
Widespread labor shortages with record low numbers of skilled journeymen and apprentices round out the factors. Currie and Brown is projecting a 3 percent to 6 percent increase in labor costs alone for the year.
To offset costs, the report recommends builders adopt new ways of working such as modular construction, wherein components of the structure are constructed off-site and then reassembled on-site in order to reduce the impact of local skills and materials shortages.
The report also recommends considering the carbon impact of projects at every stage of development, and ensuring they meet all current and future sustainability standards.
Finally, it recommends embracing new technologies such as AI tools and advanced data analytics to help increase returns on investment and predict and manage current and future challenges.
“By proactively engaging in sustainability, adopting digital technologies, and evolving work methodologies, operational efficiencies can be realized,” Rachel Personius, associate director at Currie and Brown said in a statement. “This proactive stance will help mitigate the impact of current and future construction cost increases and contribute to the development of better, sustainable built environments for all.”
