The construction industry is booming and homes and buildings are springing up everywhere. As a matter of fact, construction workers are in high demand in most states. Whether residential or public, building any type of structure can get expensive if costs are not controlled.
Our Knoxville contractor lawyers understand the importance of eliminating unnecessary overhead expenses so your business can survive and increase profits. In this two-part article, we will present some strategies for locating and reducing overhead expenses to help you streamline costs and save money. In this first part we will focus on yearly cost forecasts.
2017 Construction Cost Forecast
Back in 2017, construction costs for 2018 were forecasted to increase another 2 to 3 percent (after a 3 percent increase in 2017). Labor costs were expected to increase by 3 to 4 percent and material costs were to increase by 2 to 3 percent as well. Product prices were projected to increase as well. Cement, aggregates, concrete, and lumber rose by 3 to 4 percent, while gypsum products were projected to increase by 6 to 7 percent. Crude oil was projected to stabilize at an estimated $50 per barrel. Equipment costs price increases were projected in the 1 to 2 percent range.
Prices Continue to Rise in 2018
According to an analysis by the Associated General Contractors of America (AGC), in March of 2018, construction costs climbed for a wide range of building materials. According to Associated Builders and Contractors (ABC), “prices for inputs to construction fell by 0.5 percent but are 8.1 percent higher than at the same time one year ago.” Many of these materials are subject to proposed tariffs that could cause prices to increase further while causing scarcities. Some tariffs may even lead to project delays and cancellations if supply prices become too expensive. ABC Chief Economist Anirban Basu stated that he believes rapid material price increases will negatively impact the economy in various ways including halting development, increasing the cost of delivering government-financed infrastructure, and raising consumer costs, among other effects.
Analyze Overhead Costs
The ongoing costs (overhead expenses) associated with running a construction business differ from that of other industries because of the nature of construction work. Construction work consists of direct and indirect costs and involves frequent location changes, land, design, equipment rentals, and fluctuating labor costs. In part two of our series, we will focus on the common overhead costs construction business owners are responsible for and provide solutions for reducing these costs.
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.