Construction Costs in Focus

The industrial asset class continues to be a driving force in commercial real estate, boosted by consumer demand and supply chain evolution. However, construction costs are providing significant headwinds to a sector seemingly unphased by the pandemic.

Pandemic induced shutdowns, natural disasters, and trade route disruptions have driven up material costs for key components for new building construction. The price of both domestic and foreign steel has increased significantly, 160%, and 80% year over year. Lumber pricing has also jumped, up 73% YOY as consumers took on more home improvement projects during the pandemic. Brass & copper have seen increases as well.

That’s not all. Many believe that labor - not material - will be the biggest challenge in the year to come. There is expected demand for 430,000 construction laborers in 2021. With a potentially administration-defining infrastructure bill headed to Congress in the coming months, labor will be a hot commodity, driving up costs further. All of these factors should be taken into account for industrial users looking for new construction product.