Costs Go Up as Labor Pool Diminishes
Harvey’s impact will likely continue for another year, as the pace of residential construction recovery is spread out due to delays and complications with insurance settlements and permitting, says Kirksey.
HOUSTON—Construction costs in Houston are predicted to trend upward, anywhere from 2% to 5%. So says Kirksey’s 2018 annual construction cost update, which provides a comprehensive look at the industry, focusing primarily on office buildings and parking structures, as well as corporate interiors.
Even many months after Hurricane Harvey, its impact continues in examples such as subcontractor shortages in several trades–primarily drywall finishing and interior painting. These impacts will likely continue for another year, as the pace of residential construction recovery is spread out due to delays and complications with insurance settlements and permitting. Overall, permitting durations are no better than last year, and in some cases, worse, with the increase in total permitted projects after Harvey.
“Due to many different factors, not the least of which was Hurricane Harvey, it’s predicted that costs will rise and the impacts will likely continue for another year,” Scott Wilkinson, executive vice president and commercial team leader at Kirksey, tells GlobeSt.com. “We believe the modest cost increases over the past year and predicted for the next year are positive signs that the overall economy is steadily improving in Houston.”
Likewise, the recently proposed 25% tariffs on steel and aluminum will have a noticeable impact on the heavily steel-dependent trades of electrical, mechanical, drywall framing, structural steel and concrete reinforcement (rebar). Although much of the material in these trades is domestically produced, there has already been an immediate price increase across the board–with more adjustments likely if the tariff is indeed imposed and the true impacts become apparent, the report predicts.
Looking toward the future, the biggest shadow on all of the building trades is the diminishing pool of talent for skilled trades. Although labor rates are currently stable, the ability to staff projects properly is no longer a certainty. As a result, construction durations may likely increase, not decrease, Kirksey cautions.