It is little secret that materials costs have been extremely volatile this year, with almost all construction materials, including steel, lumber, glass, concrete and gypsum, posting cost increases. These materials costs are generally inflexible, and developers find relief in adjusting labor costs and the project timeline to offset high materials fees. However, the pandemic limited flexibility for developers to adjust soft costs, fueling cost inflation.

Despite rising development costs, emerging secondary markets have remained relatively affordable for new development, according to the Development Opportunities Index from CBRE. Orlando and San Antonio topped the index as the lowest-cost markets. Multifamily and industrial projects are driving the development activity, while San Antonio has some of the lowest land prices in the index. Memphis, Kansa City and Jacksonville also made the list of the most affordable construction markets, according to the report. Low land prices were a key factor in the affordability for each of these markets.

The larger landscape, though, is one of rising costs, despite these bright spots.