1 QUARTER ST

DR AF T

2023

CHICAGO CONSTRUCTION MARKET ANALYSIS

www.powerconstruction.net

CHICAG O M A R KET OV ERV I EW Price stability and consistency returned last quarter for many materials and products. Supply chain bottlenecks still exist but few construction materials appear to be affected. Oil prices have moderated since the beginning of the third quarter, which has eased transportation costs across the board. The Federal Reserve’s rate increases have dampened demand. Housing starts, a reliable leading indicator, have continued to weaken, and talk of a 2023 recession has tempered many upward pricing pressures. Overall, subcontractors are still busy, but capacity may open up later in 2023.

M ATE R IA LS / T R A D E OV ERV I E W

STRUCTURAL STEEL •

Steel production has stayed stable through 2022 with US production maintaining approximately 7mm tons/month. Material availability is not an issue, with mill lead times ranging from six to twelve weeks depending on rolling schedules.

•

Structural steel raw material prices continued to decline in the fourth quarter, but have now stabilized. No sharp movement (up or down) is anticipated in the near term. Joist and deck pricing continue to soften with the biggest decrease in metal deck. We anticipate this downward pressure will continue until the summer and fall months.

•

Lead times for larger jobs:

6 Structural steel: 5-6 months (driven more by shop capacity than raw materials) 6 Metal deck: 3-4 months 6 Steel joists: 3-4 months

CONCRETE

BOTTOM LINE: We’re seeing downward pricing pressure on wide flange sizes and increases in

•

Rebar is $1,625/ton; down 17% since 2022’s third quarter.

•

Post-tensioned material has dropped from $2.65/lb to $2.15/lb.

•

Forming materials had modest increases this year.

WOOD MATERIALS

•

Ready-mix had a significant increase last year due to increases in aggregate, admixtures, and cement costs. Prices have leveled out at $175/cuyd in the last 60 days. This should remain stable until an anticipated $10/cuyd cost increase in Summer 2023.

plate and tube shapes. We expect steel pricing to stay consistent for the immediate future.

The pandemic ushered in amazing volatility in wood materials, with prices bouncing all over the place these last few years. Lumber prices have settled down, landing much closer to historical averages, at less than $.50/bdft.

CHICAG O M A R KET OV ERV I EW Price stability and consistency returned last quarter for many materials and products. Supply chain bottlenecks still exist but few construction materials appear to be affected. Oil prices have moderated since the beginning of the third quarter, which has eased transportation costs across the board. The Federal Reserve’s rate increases have dampened demand. Housing starts, a reliable leading indicator, have continued to weaken, and talk of a 2023 recession has tempered many upward pricing pressures. Overall, subcontractors are still busy, but capacity may open up later in 2023.

M ATE R IA LS / T R A D E OV ERV I E W

STRUCTURAL STEEL •

Steel production has stayed stable through 2022 with US production maintaining approximately 7mm tons/month. Material availability is not an issue, with mill lead times ranging from six to twelve weeks depending on rolling schedules.

•

Structural steel raw material prices continued to decline in the fourth quarter, but have now stabilized. No sharp movement (up or down) is anticipated in the near term. Joist and deck pricing continue to soften with the biggest decrease in metal deck. We anticipate this downward pressure will continue until the summer and fall months.

•

Lead times for larger jobs:

6 Structural steel: 5-6 months (driven more by shop capacity than raw materials) 6 Metal deck: 3-4 months 6 Steel joists: 3-4 months

CONCRETE

BOTTOM LINE: We’re seeing downward pricing pressure on wide flange sizes and increases in

•

Rebar is $1,625/ton; down 17% since 2022’s third quarter.

•

Post-tensioned material has dropped from $2.65/lb to $2.15/lb.

•

Forming materials had modest increases this year.

WOOD MATERIALS

•

Ready-mix had a significant increase last year due to increases in aggregate, admixtures, and cement costs. Prices have leveled out at $175/cuyd in the last 60 days. This should remain stable until an anticipated $10/cuyd cost increase in Summer 2023.

plate and tube shapes. We expect steel pricing to stay consistent for the immediate future.

The pandemic ushered in amazing volatility in wood materials, with prices bouncing all over the place these last few years. Lumber prices have settled down, landing much closer to historical averages, at less than $.50/bdft.

ROOFING • • •

Lead times are still longer than pre-pandemic, but shrinking: 6 Poly Iso & TPO Roofing is currently at three to six weeks for most products. However, we anticipate lead times to reach six to eight weeks again in June. 6 Coverboards (Dens Deck) have a lead time of six to eight weeks. 6 XPS Blue Board is currently close to normal at three to six weeks for most products. 6 Geofoam/EPS have a lead time of four to eight weeks depending on supplier. 6 Asphalt is readily available for built-up and modified roofing, but felts availability has been erratic. Modified sheets have a lead time of two to weeks out, but certain products have extended lead times. 6 Lead times are varying for PVC roofing with certain membranes in stock, but others seeing lead times past 12 weeks. 6 Hydrotech is readily available. 6 Most colors and gauges for sheet metal flashing are two to three weeks out. Custom colors have an average lead time of 16 to 20 weeks. 6 Pavers and garden materials are experiencing typical lead times. Material pricing:

•

Copper pricing decreased from $4.94/lb in March 2022 to $3.55/lb from July through December. More recently, prices have topped off at $4.10/lb.

•

Cast iron has stabilized with a possibility of increasing in Summer 2023.

•

Carbon steel piping has increased and will be watched closely in 2023.

•

Plumbing trim has been up between 8%-10% over the last 12 months. Kohler issued a blended cost increase of 0.7% this month.

BOTTOM LINE: Plumbing piping materials generally make up 40% of plumbing costs - - resulting in overall plumbing cost increases of 8%-10% over the past 12 months depending on the project make-up. Pricing may increase, but at a slower pace than 2022.

HVAC •

Lead times continue to be extended: Standard AHUs 18-26 weeks, custom AHUs 30-40 weeks; Steam Boilers 50+ weeks; CRAC units 12+ months; Air-Cooled chillers 46-52 weeks; any equipment with a computer chip is still 20+ weeks. Manufacturers do not meet agreed upon delivery dates in some cases.

•

For most equipment, pricing has leveled off, with modest price increases in January (5%).

•

Sheet metal pricing has decline din the last 60 days.

•

Union Labor continues to be in tight supply and will continue to be a long-term issue.

6 Most product manufacturers and suppliers are announcing Q1 and Q2 increases of 5-10% based on a various product lines. It is to be determined if this increase will hold. After a period of hyperinflation (Fall 2021-Summer 2022), many products have begun to level off at more standard escalations during the last three months.

BOTTOM LINE: Materials generally account for about 6% of roofing costs. Roofing material in 2023 may still outpace construction escalations, but it should be less significant than 2022.

GLAZING •

Glass and curtainwall pricing has stabilized.

•

Certain laminated glass interlayers - typically used in glass railings - are short in supply. However, this is the only issue with material procurement to date.

•

Lead times for existing tested curtainwall systems have returned to more typical averages (26 to 30 weeks) due to fabrication capacity. Untested or custom systems have longer ranges (12+ months)

•

PLUMBING

Window Wall pricing has leveled out due to delayed residential construction projects, but the subcontractor market has remained busy.

BOTTOM LINE: We expect glazing prices to remain consistent over the next few months.

DRYWALL •

Metal studs pricing has had some relief in the last quarter before increasing in January.

•

Standard drywall is readily available right now. However, specialty boards, glass-mat sheathing and shaftwall are in short supply with lead times up to 12 weeks, depending on order size.

•

Most drywall board, glass-mat and shaftwall products had modest price increases in January.

BOTTOM LINE: Although we did not expect drywall costs to rise in 2022, we still expect modest increases in 2022.

BOTTOM LINE: HVAC materials & equipment generally make up 35%-40% of HVAC costs; resulting in overall HVAC cost increase of 10%-15% over the past 12 months with jobs that are heavier on equipment in the higher portion of that range. 2023 should see more modest/typical escalation.

ELECTRICAL •

The biggest issue continues to be establishing lead times due to inconsistent supply-chain. Equipment delivery dates are frequently missed.

•

Lead time survey: 6 Diesel Generators (larger units without enclosures run 10-20 weeks less)

3 15kw-180kw; 56 weeks 3 230kw-6000kw; 60+ weeks 6 Natural Gas Generators (larger units without enclosures run 10-20 weeks less) 3 25kw-36kw; 28 weeks 3 40kw-500kw; 60+ weeks 6 Secondary Sub Stations (varies greatly by manufacturer); 50-80 weeks 6 Medium Voltage Switchgear & Substations; 60+ weeks 6 Low Voltage Switchgear; 60+weeks 6 Distribution Panelboards (varies greatly by manufacturer); 24-48 weeks 6 UPS; 40+ weeks

ROOFING • • •

Lead times are still longer than pre-pandemic, but shrinking: 6 Poly Iso & TPO Roofing is currently at three to six weeks for most products. However, we anticipate lead times to reach six to eight weeks again in June. 6 Coverboards (Dens Deck) have a lead time of six to eight weeks. 6 XPS Blue Board is currently close to normal at three to six weeks for most products. 6 Geofoam/EPS have a lead time of four to eight weeks depending on supplier. 6 Asphalt is readily available for built-up and modified roofing, but felts availability has been erratic. Modified sheets have a lead time of two to weeks out, but certain products have extended lead times. 6 Lead times are varying for PVC roofing with certain membranes in stock, but others seeing lead times past 12 weeks. 6 Hydrotech is readily available. 6 Most colors and gauges for sheet metal flashing are two to three weeks out. Custom colors have an average lead time of 16 to 20 weeks. 6 Pavers and garden materials are experiencing typical lead times. Material pricing:

•

Copper pricing decreased from $4.94/lb in March 2022 to $3.55/lb from July through December. More recently, prices have topped off at $4.10/lb.

•

Cast iron has stabilized with a possibility of increasing in Summer 2023.

•

Carbon steel piping has increased and will be watched closely in 2023.

•

Plumbing trim has been up between 8%-10% over the last 12 months. Kohler issued a blended cost increase of 0.7% this month.

BOTTOM LINE: Plumbing piping materials generally make up 40% of plumbing costs - - resulting in overall plumbing cost increases of 8%-10% over the past 12 months depending on the project make-up. Pricing may increase, but at a slower pace than 2022.

HVAC •

Lead times continue to be extended: Standard AHUs 18-26 weeks, custom AHUs 30-40 weeks; Steam Boilers 50+ weeks; CRAC units 12+ months; Air-Cooled chillers 46-52 weeks; any equipment with a computer chip is still 20+ weeks. Manufacturers do not meet agreed upon delivery dates in some cases.

•

For most equipment, pricing has leveled off, with modest price increases in January (5%).

•

Sheet metal pricing has decline din the last 60 days.

•

Union Labor continues to be in tight supply and will continue to be a long-term issue.

6 Most product manufacturers and suppliers are announcing Q1 and Q2 increases of 5-10% based on a various product lines. It is to be determined if this increase will hold. After a period of hyperinflation (Fall 2021-Summer 2022), many products have begun to level off at more standard escalations during the last three months.

BOTTOM LINE: Materials generally account for about 6% of roofing costs. Roofing material in 2023 may still outpace construction escalations, but it should be less significant than 2022.

GLAZING •

Glass and curtainwall pricing has stabilized.

•

Certain laminated glass interlayers - typically used in glass railings - are short in supply. However, this is the only issue with material procurement to date.

•

Lead times for existing tested curtainwall systems have returned to more typical averages (26 to 30 weeks) due to fabrication capacity. Untested or custom systems have longer ranges (12+ months)

•

PLUMBING

Window Wall pricing has leveled out due to delayed residential construction projects, but the subcontractor market has remained busy.

BOTTOM LINE: We expect glazing prices to remain consistent over the next few months.

DRYWALL •

Metal studs pricing has had some relief in the last quarter before increasing in January.

•

Standard drywall is readily available right now. However, specialty boards, glass-mat sheathing and shaftwall are in short supply with lead times up to 12 weeks, depending on order size.

•

Most drywall board, glass-mat and shaftwall products had modest price increases in January.

BOTTOM LINE: Although we did not expect drywall costs to rise in 2022, we still expect modest increases in 2022.

BOTTOM LINE: HVAC materials & equipment generally make up 35%-40% of HVAC costs; resulting in overall HVAC cost increase of 10%-15% over the past 12 months with jobs that are heavier on equipment in the higher portion of that range. 2023 should see more modest/typical escalation.

ELECTRICAL •

The biggest issue continues to be establishing lead times due to inconsistent supply-chain. Equipment delivery dates are frequently missed.

•

Lead time survey: 6 Diesel Generators (larger units without enclosures run 10-20 weeks less)

3 15kw-180kw; 56 weeks 3 230kw-6000kw; 60+ weeks 6 Natural Gas Generators (larger units without enclosures run 10-20 weeks less) 3 25kw-36kw; 28 weeks 3 40kw-500kw; 60+ weeks 6 Secondary Sub Stations (varies greatly by manufacturer); 50-80 weeks 6 Medium Voltage Switchgear & Substations; 60+ weeks 6 Low Voltage Switchgear; 60+weeks 6 Distribution Panelboards (varies greatly by manufacturer); 24-48 weeks 6 UPS; 40+ weeks

E LEC T R I CA L C O N T. . . •

6 Security cameras and devices 26+ weeks; HID Card Readers - no delivery dates are being provided (52+ weeks) Cost survey: 6 Labor contract up for negotiations in June 2023 6 Most commodity prices have moderated. Copper has retreated significantly.



6 Equipment, Light Fixtures & Fire Alarm System pricing has remained consistent over the last few months.

BOTTOM LINE: Look for more modest price increases in electrical equipment and materials over the next few months.

LEADING INDICATORS •

The most significant leading indicator is the current discussion on interest rates. This has already impacted residential mortgages with the commercial impact starting to show up. The Fed Fund Rate was near zero prior to March, was 2.0% in July and is currently at 4.33%.

•

•

Housing is a significant leading indicator of the overall construction market. Further evidence of demand retreating is the reduction in housing starts. U.S. housing starts edged 0.5% lower in November 2022, after falling 2.1% in October per the U.S. Census Bureau.

•

However, when high mortgage rates drive up the cost of single-family homes, renting becomes the more affordable option. Downtown and suburban occupancy rates are also high. Both of these trends help drive demand for multifamily projects. Despite this, several large apartment projects in Chicago have been delayed.

The Dodge Momentum Index, after pumping the brakes in August, continued to gain ground through the end of 2022. Indications are that owners/developers are continuing to move projects forward despite economic headwinds. Recent and forthcoming interest rate changes may impact this moving forward.

E LEC T R I CA L C O N T. . . •

6 Security cameras and devices 26+ weeks; HID Card Readers - no delivery dates are being provided (52+ weeks) Cost survey: 6 Labor contract up for negotiations in June 2023 6 Most commodity prices have moderated. Copper has retreated significantly.



6 Equipment, Light Fixtures & Fire Alarm System pricing has remained consistent over the last few months.

BOTTOM LINE: Look for more modest price increases in electrical equipment and materials over the next few months.

LEADING INDICATORS •

The most significant leading indicator is the current discussion on interest rates. This has already impacted residential mortgages with the commercial impact starting to show up. The Fed Fund Rate was near zero prior to March, was 2.0% in July and is currently at 4.33%.

•

•

Housing is a significant leading indicator of the overall construction market. Further evidence of demand retreating is the reduction in housing starts. U.S. housing starts edged 0.5% lower in November 2022, after falling 2.1% in October per the U.S. Census Bureau.

•

However, when high mortgage rates drive up the cost of single-family homes, renting becomes the more affordable option. Downtown and suburban occupancy rates are also high. Both of these trends help drive demand for multifamily projects. Despite this, several large apartment projects in Chicago have been delayed.

The Dodge Momentum Index, after pumping the brakes in August, continued to gain ground through the end of 2022. Indications are that owners/developers are continuing to move projects forward despite economic headwinds. Recent and forthcoming interest rate changes may impact this moving forward.

•

MAJOR TRADE SUBCONTRACTORS

AIA’s ABI (Architectural Billing Index) has weakened in the fourth quarter and inquiries, contracts, and billings are all lower. Weakness in the multi-family market is weighing the index down (Any score < 50 indicates a decline in firm billings, > 50 an increase). Inquiries by Month

Month 1/1/2020

11/1/2022

20

Inquiries

8

Index

7

0

6

1

7

1

17

20

20

21

15

14

11

12

11

16

12

13

14

12

14

8

8

6

4

2

2

-1 -10

-20

 Midwest  National

1

1

5

12

-26

Jan 2020

-21 Jul 2020

Jan 2021

Jul 2021

Jan 2022

Jul 2022

Design Contracts by Month

Design Contracts

20 6

3

2

0 -5 -20

-22 -21

-7

-3

-3

-2

-3

6

11

12

10

8

7

4

7

6

6

6

5

11

5

7

3

2

2

1

-1

-3

-1

-3

-16

Jan 2020

Jul 2020

Jan 2021

Jul 2021

Jan 2022

Jul 2022

Billings by Month

•

Billings

20 3.0 0

3.0

-1.0

-20

-15.0

-9.0 -9.0 -8.0 -20.0

-5.0 -4.0 -5.0

-8.0

6.0

8.0

9.0

8.0

5.0

6.0

5.0

4.0

2.0

8.0 1.0

1.0

1.0

7.0

4.0

3.0

1.0

3.0

2.0 -2.0 -3.0

-5.0

-17.0

Jan 2020

Jul 2020

Jan 2021

Jul 2021

Jan 2022

Jul 2022

BACKLOG DATA •

WORKFORCE DATA

The following information is from our periodic sub-contractor survey for the Chicago Construction Market. Graphs represent the overall market as well as trade by trade analysis. Chicagoland subcontractors remain rather busy but currently have erosion in backlog near the

Nationally, the unemployment rate among construction jobseekers with construction experience went from 7.5% percent in June 2021 to 3.7% percent in June 2022 and is now at 4.4% as of September 2022 according to the AGC and the US Bureau of Labor Statistics. This is lowest in the 23-year history of the data. Nationally there are almost 500,00 construction jobs available, but less than 400,000 experienced workers still available. The bottom line is that there are very few experienced jobseekers left to hire. Locally, the Chicago labor market has a better picture currently, but the same long-term underlying issue with attracting more young people to construction trade work. The Chicago workforce availability improved slightly from last quarter, but this will be a growing problem both nationally and locally.

WORKFORCE COMBINED

end of the year.

ALL SUBCONTRACTORS

WORKFORCE BY TRADE

•

MAJOR TRADE SUBCONTRACTORS

AIA’s ABI (Architectural Billing Index) has weakened in the fourth quarter and inquiries, contracts, and billings are all lower. Weakness in the multi-family market is weighing the index down (Any score < 50 indicates a decline in firm billings, > 50 an increase). Inquiries by Month

Month 1/1/2020

11/1/2022

20

Inquiries

8

Index

7

0

6

1

7

1

17

20

20

21

15

14

11

12

11

16

12

13

14

12

14

8

8

6

4

2

2

-1 -10

-20

 Midwest  National

1

1

5

12

-26

Jan 2020

-21 Jul 2020

Jan 2021

Jul 2021

Jan 2022

Jul 2022

Design Contracts by Month

Design Contracts

20 6

3

2

0 -5 -20

-22 -21

-7

-3

-3

-2

-3

6

11

12

10

8

7

4

7

6

6

6

5

11

5

7

3

2

2

1

-1

-3

-1

-3

-16

Jan 2020

Jul 2020

Jan 2021

Jul 2021

Jan 2022

Jul 2022

Billings by Month

•

Billings

20 3.0 0

3.0

-1.0

-20

-15.0

-9.0 -9.0 -8.0 -20.0

-5.0 -4.0 -5.0

-8.0

6.0

8.0

9.0

8.0

5.0

6.0

5.0

4.0

2.0

8.0 1.0

1.0

1.0

7.0

4.0

3.0

1.0

3.0

2.0 -2.0 -3.0

-5.0

-17.0

Jan 2020

Jul 2020

Jan 2021

Jul 2021

Jan 2022

Jul 2022

BACKLOG DATA •

WORKFORCE DATA

The following information is from our periodic sub-contractor survey for the Chicago Construction Market. Graphs represent the overall market as well as trade by trade analysis. Chicagoland subcontractors remain rather busy but currently have erosion in backlog near the

Nationally, the unemployment rate among construction jobseekers with construction experience went from 7.5% percent in June 2021 to 3.7% percent in June 2022 and is now at 4.4% as of September 2022 according to the AGC and the US Bureau of Labor Statistics. This is lowest in the 23-year history of the data. Nationally there are almost 500,00 construction jobs available, but less than 400,000 experienced workers still available. The bottom line is that there are very few experienced jobseekers left to hire. Locally, the Chicago labor market has a better picture currently, but the same long-term underlying issue with attracting more young people to construction trade work. The Chicago workforce availability improved slightly from last quarter, but this will be a growing problem both nationally and locally.

WORKFORCE COMBINED

end of the year.

ALL SUBCONTRACTORS

WORKFORCE BY TRADE

SUBCONTRACTOR PRICING SENTIMENT

FINAL ANALYSIS

•

We asked subcontractors their perceptions of how much costs have gone up in the last 12 months as well as where they anticipate them to go in the next 12 months.

•

•

The perception of what has changed in the last 12 months has changed significantly since last year’s escalation occurred in the first three quarters of 2022.

•

Looking forward, the perception is that 18% of subcontractors anticipate their pricing increasing by 10% or more this year–which 36% of subcontractors responded three months ago. While subcontractors think that pricing will continue to stabilize with more modest increases, they don’t appear to be buying into the notion that pricing will continue on a downward path just yet.

From early 2022 to the beginning of the third quarter, we saw higher than expected increases in the Chicagoland construction market. Things have stabilized over the last few months, which we expect to remain the case through much of the first quarter (with some notable exceptions). GDP slid 0.7% in November and remained flat throughout December, eventually rising to 1.4% in January. Recession fears are still top of mind, but these modest moves may indicate a soft landing to any forthcoming recession.

•

At the moment, upward construction pricing pressures are somewhat countered by those that mitigate it. Anticipating escalation in this environment is especially difficult since we may be at an inflection point. Reasonable guidance on cost escalation over the next 12 months would be in the range of 3.8%-5.8%. Those projects that are more complicated or more heavily burdened with equipment will see pricing in the higher end of the range, while standard construction may land on the lighter side of the range. For reference the CPI is up 6.5% over 12-months, which is a slight improvement from the 8.2% we saw last quarter.

•

Of course, the pandemic is still playing a role in all these numbers. The more we put that in the rear-view mirror, the more we’ll be able to (and should) rely on historical year-toyear escalations in any future Chicagoland market analysis. That said, any significantly out sized project coming to market will have a similarly out sized influence on any projections. The effects of Lincoln Yards, O’Hare 21, 78 Chicago, Northwestern, University of Chicago, Obama Library and a potential suburban NFL football stadium are all projects that will affect subcontractor and workforce availability as well as overall construction pricing.

•

National – and even international – trends are worth mentioning as well. According to the U.S. Census Bureau, the overall U.S. construction market totals $1.6 trillion annually. The H.R.3684 Infrastructure Investment and Jobs Act will influence that number – approximately $550 billion in new construction is slated for the next five years, with potentially more occurring in the subsequent five. However, their impact won’t be as significant as might be expected – the impact to the national construction market will amount to an added 3% or so. Long term, we anticipate cost escalation to settle at closer to 4% to 4.5% annually.

PERCEPTION OF BID ESCALATION OVER PREVIOUS 12 MONTHS TO PRESENT

PERCEPTION OF PROJECTED BID ESCALATION FROM PRESENT TO 12 MONTHS FROM NOW

Escalation Percent (%) Change From Jan 2019 and Projected to Jan 2025

+8.8%

+4.8%

Jan 2019

Jan 2020

Jan 2021

Jan 2022

Date

Jan 2023

Jan 2024

Jan 2025

SUBCONTRACTOR PRICING SENTIMENT

FINAL ANALYSIS

•

We asked subcontractors their perceptions of how much costs have gone up in the last 12 months as well as where they anticipate them to go in the next 12 months.

•

•

The perception of what has changed in the last 12 months has changed significantly since last year’s escalation occurred in the first three quarters of 2022.

•

Looking forward, the perception is that 18% of subcontractors anticipate their pricing increasing by 10% or more this year–which 36% of subcontractors responded three months ago. While subcontractors think that pricing will continue to stabilize with more modest increases, they don’t appear to be buying into the notion that pricing will continue on a downward path just yet.

From early 2022 to the beginning of the third quarter, we saw higher than expected increases in the Chicagoland construction market. Things have stabilized over the last few months, which we expect to remain the case through much of the first quarter (with some notable exceptions). GDP slid 0.7% in November and remained flat throughout December, eventually rising to 1.4% in January. Recession fears are still top of mind, but these modest moves may indicate a soft landing to any forthcoming recession.

•

At the moment, upward construction pricing pressures are somewhat countered by those that mitigate it. Anticipating escalation in this environment is especially difficult since we may be at an inflection point. Reasonable guidance on cost escalation over the next 12 months would be in the range of 3.8%-5.8%. Those projects that are more complicated or more heavily burdened with equipment will see pricing in the higher end of the range, while standard construction may land on the lighter side of the range. For reference the CPI is up 6.5% over 12-months, which is a slight improvement from the 8.2% we saw last quarter.

•

Of course, the pandemic is still playing a role in all these numbers. The more we put that in the rear-view mirror, the more we’ll be able to (and should) rely on historical year-toyear escalations in any future Chicagoland market analysis. That said, any significantly out sized project coming to market will have a similarly out sized influence on any projections. The effects of Lincoln Yards, O’Hare 21, 78 Chicago, Northwestern, University of Chicago, Obama Library and a potential suburban NFL football stadium are all projects that will affect subcontractor and workforce availability as well as overall construction pricing.

•

National – and even international – trends are worth mentioning as well. According to the U.S. Census Bureau, the overall U.S. construction market totals $1.6 trillion annually. The H.R.3684 Infrastructure Investment and Jobs Act will influence that number – approximately $550 billion in new construction is slated for the next five years, with potentially more occurring in the subsequent five. However, their impact won’t be as significant as might be expected – the impact to the national construction market will amount to an added 3% or so. Long term, we anticipate cost escalation to settle at closer to 4% to 4.5% annually.

PERCEPTION OF BID ESCALATION OVER PREVIOUS 12 MONTHS TO PRESENT

PERCEPTION OF PROJECTED BID ESCALATION FROM PRESENT TO 12 MONTHS FROM NOW

Escalation Percent (%) Change From Jan 2019 and Projected to Jan 2025

+8.8%

+4.8%

Jan 2019

Jan 2020

Jan 2021

Jan 2022

Date

Jan 2023

Jan 2024

Jan 2025

QUESTIONS?

We’re just a call or text away.

MARK LUMIA, AIA PRECONSTRUCTION EXECUTIVE (847) 525-4488 [email protected]

www.powerconstruction.net 8750 W. Bryn Mawr, Suite 500 Chicago, IL 60631