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Developers Face Cost Concerns As Multifamily Construction Ramps Up

Digested from “Scarce Labor Drives Construction Costs for Multifamily Developers”
National Real Estate Investor (11/17/15) Anderson, Bendix

Material costs may be low, but it’s hard for developers to find skilled workers — many of whom left construction for other industries when the real estate bubble burst — to complete the myriad multifamily construction projects in the works. And as the economy continues to strengthen, that also means labor costs in general are higher.

Costs for metals such as steel, copper, brass and aluminum have dropped between 12 and 15 percent over the 12 months ending September 2015. Cement, flat glass and paving mixture prices decreased 4.6 to 6.3 percent, and some wood products fell 11 percent. These decreases are partly the result of catering to other economies, such as China’s, that are now slowing down.

Overall non-residential construction costs, however, rose 1.8 percent over the same 12 months. Because unemployment is low, labor costs have risen. And materials, such as window walls, that were not directed toward overseas construction are becoming more expensive too.

Similar economic booms have occurred in the past, though, with little follow-through. The next quarter will be telling.

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