RLB's Second Quarter 2015 USA Construction Cost Report shows small gains and a widening gap between growth of labor and material costs.

June 30, 2015.

Slow growth for the U.S. mainland

The Rider Levett Bucknall (RLB) Second Quarter Construction Cost Report shows that the mainland U.S. construction industry continued its slow growth forward in the last quarter, with no signs of gaining momentum. The report also states that activity for construction put-in-place increased just 1.7% above June 2014 figures, while the unemployment rate for construction laborers increased during the same period, falling to 7.5% in April 2015.

Construction cost inflation up 5.5% in last 12 months

RLB’s research indicates that U.S. construction cost inflation continued to rise in the second quarter of 2015 at an annualized rate of 5.5%. In contrast, the U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) for all urban consumers fell 0.2% and ENR’s Building Cost Index rose only 2.7% in the same period.

Industry indices support RLB findings

The firm cited additional industry indices to support its findings, including the American Institute of Architects’ (AIA) Architectural Billing Index (ABI), which stated that March’s ABI was a lackluster 51.7 and April’s number fell to 48.8, reflecting a decrease in demand for design services, especially in the Northeast. It reported that the The National Association of Home Builders’ Confidence Index fell two points to 54 in May, the fourth fall in five months, and The Conference Board’s Consumer Confidence Index rose from 94.3 (April) to 95.4 (May), which is still below the March figure of 101.4.

On the national labor front, employers added 223,000 jobs in April – up from a disappointing 85,000 in March – while the general unemployment rate fell to 5.4%, the lowest level since May 2008.

“In a rising market, there is normally a gap between growth in labor and material costs and growth in bid costs,” notes Julian Anderson, president of RLB in North America. “Looking forward, we observe that this gap has been steadily increasing since 2013, and is likely to widen even if the construction industry recovery strengthens.”

According to the U.S. Department of Commerce, construction put- in-place during March 2015 was estimated at a seasonally adjusted annual rate of $966.6 billion, which is 0.6% below the revised February estimate of $972.9 billion. The March 2015 figure is 2.0% above the March 2014 estimate of $947.3 billion. The value of construction for the first three months of this year was $206.7 billion, 3.2% above the same period in 2014.

RLB tracks construction costs in 12 major U.S. cities. From January 1, 2015 through April 1, 2015, the national average increase in construction cost was approximately 1.2%. Chicago and Honolulu experienced the greatest increases showing inflation of 1.6% and 3.0% respectively. Several other North American locations experienced inflation between 1.0% and 1.3% with Boston, Los Angeles, New York, and Phoenix all experiencing less than 1.0% change in the quarter.

About the RLB Quarterly Construction Cost Report

RLB reports on the comparative cost of construction in 12 U.S. cities on a quarterly basis, indexing them to show how costs are changing in each city in particular, and against the costs of the other 11 locations. Together with additional international and national cost compendia, the cost research equips clients with complete and relevant information to assist in key business decisions.

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About RLB

With a network that covers the globe and a heritage spanning over two centuries, Rider Levett Bucknall is a leading independent organisation in cost management and quantity surveying, project management and advisory services.

Our achievements are renowned: from the early days of pioneering quantity surveying, to landmark projects such as the Sydney Opera House, HSBC Headquarters Building in Hong Kong, the 2012 London Olympic Games and CityCenter in Las Vegas.

We continue this successful legacy with our dedication to the value, quality and sustainability of the built environment. Our innovative thinking, global reach, and flawless execution push the boundaries. Taking ambitious projects from an idea to reality.