Industrial's Materials Mix Leads to Construction Cost Spike
Certain categories appear to be moderating on the horizon, but sentiment is mixed.
Given their highly concentrated materials mix, industrial construction costs spiked more in the past year or so than other commercial types according to CBRE’s Warehouse and Distribution Construction Cost Trends 2023-2024.
Steel, and carpentry as well as concrete and precast/tilt comprise more than half of the shell cost and each had higher price spikes, along with roofing costs.
CBRE reported that certain categories appear to be moderating on the horizon, but sentiment is mixed.
Contractors noted on average that costs have been virtually flat since 2022. “However, this varies dramatically by market,” according to the report. “Some recent budget estimates noted over 10% cost increases, while others noted significant decreases.
CBRE’s survey also showed that lead times for key materials have generally improved and are unlikely to worsen in the near term.
It did note, though, that the lead times for key categories such as electrical equipment and HVAC remain 2 to 3 times their pre-pandemic timeframe, with little improvement expected this year.
“Normal pre-pandemic lead times for most materials ranged from 6 to 12 weeks, then rose to 12 to 33 weeks as demand spiked, and supply chains were disrupted,” according to the report.
All forecasts vary based on geography, the report said.
“There are natural market-to-market price differences due to local competitive advantages during periods of market equilibrium,” CBRE said. “Cost increases are experienced in every market during major supply, chain instability, which tended to impact lower, cost markets more.”
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