DCN ARCHIVES

June 29, 2009

U.S. sees dip in construction costs

For the latest quarter ending April 2009, the overall Construction Cost Index (CCI) for the U.S. slipped into decline, according to new numbers from RSMeans, a leading supplier of construction cost information.

The CCI dropped 2.0% quarter to quarter (January to April 2009), which translates to a 7.9% drop on an annualized basis.

“The total index decline was all due to materials, as installation rates remained high,” said Reed Construction Data chief economist Alex Carrick. See Latest Construction Cost Changes for 51 Major U.S. Cities as Calculated by RSMeans.

To come up with its Construction Cost Index, RSMeans employs a composite model of nine building types: factory, office building, retail store, town hall, high school, hospital, parking garage, apartment building and hotel/motel.

Material prices to April 2009 were down 1.6% year over year, but slipped 4.9% quarter to quarter (January to April). The greatest sub-component changes came in metal joists and decking (-18.9% quarter to quarter); concrete reinforcing (-17.6%) and plaster and gypsum board (-7.2%).

Despite layoffs in the construction industry, however, installation or labour costs continued to rise “at a good pace,” Carrick said, increasing 5.7% year over year and 1.8% quarter to quarter.

“While construction starts in non-residential building and engineering construction are falling into rapid decline, at least until the publicly-funded stimulus wave is felt more clearly, there remains a solid carryover of work at the job site,” Carrick noted.

Much of this work is more highly skilled, particularly in the civil/heavy engineering category, and therefore higher paying, he added.

The fall in construction costs overall is “highly unusual,” Carrick said, but there are indications this may be short-lived.

According to the RSMeans Construction Cost Index for U.S. cities, the most significant drops quarter-to-quarter annualized were in Memphis (-11.4%), Charlotte (-11.1%) and Salt Lake City (-11%). Cities that fared the best in the same period were Tampa (0%), Seattle (-2.5%) and Kansas City (-3.0%).

The national average was -7.9%

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