The construction industry is booming, isn’t it? Buildings are springing up everywhere, yet there are challenges amid the opportunities. The cost of doing business in the construction industry is a present concern for companies across the United States. In part one, our Birmingham construction lawyers will discuss two of the main issues contributing to the cost increases that the construction industry is currently experiencing. In part two, we will discuss inflation and the role of technology in construction costs.
Builders are taking a hit from skyrocketing material prices as the cost of lumber, steel, and concrete continue to surge. The U.S. Bureau of Labor Statistics estimated that there was a 4.8 percent increase in material cost between 2016 and 2017. Both contractors and suppliers alike are concerned about these rising costs as supply and demand fluctuate.
As energy prices continue to rise, the cost of materials also increase to account for the difference. The rise in material costs leads to an increase in wholesale pricing since material manufacturers have to find a way to balance the cost of material transport. Increased wholesale pricing negatively impacts a company’s bottom line. Rising material costs are built into future projects, which leads to an increase in developer costs. This cost increase trickles down to consumers who will decrease their spending in reaction to the rising prices. Once this happens, fewer investments are made in new construction projects. Companies are wise to find ways to withstand the effects of rising material costs.
Fluctuating material costs are a given in every construction project. However, the rising cost of labor is another issue companies must contend with. The entire nation is experiencing a labor shortage and companies are having to think outside the box to attract new and skilled talent to fill positions. These recruiting efforts are necessary, but they come with a hefty price tag that adds to growing construction costs. Many people view construction jobs as difficult and physically demanding positions that do not pay well. Construction companies are having to disprove misconceptions about working in the industry, which unfortunately comes at a cost as well.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.