Skilled Trade Labor:
The shortage in qualified skilled labor which began several years ago persists today. As reported by the Associated Builders and Contractors in January of 2024 “the construction industry will need to attract an estimated 501,000 additional workers on top of the normal pace of hiring to meet the demand for labor.” Contractors continue to compete with each other to attract and maintain skilled workers by offering higher wages and benefits.
Current Global and Domestic Supply Chain:
The supply chain disruptions and bottlenecks triggered by the COVID-19 pandemic have begun to stabilize. Concrete, steel, and most architectural products are back to pre-pandemic lead times; however, with demand still very strong for data centers we continue to see delays with mechanical equipment, electrical switchgear equipment, and generators. Managing the submittal and procurement process will remain essential in maintaining construction schedules.
Contractor Current Market Conditions:
Contractor backlog declined slightly in January but remains sturdy at 8.4 months per the Associated Builders and Contractors:
Construction material costs have stabilized but remain 30% to 40% higher than the pre-pandemic levels. Even as prices have stabilized, inflation continues to be a challenge and is higher than the targeted 2.5% annual rate. Gas prices have recently surged to a four-month high of $3.40/gallon nationally and are forecasted to peak between $3.50 to 3.75/gallon before declining later this summer. Construction labor rates are forecasted to rise by an annual rate of 4%. As 2023 ended we saw the annual escalation for construction projects drop from its unprecedented highs down to roughly 4.94%. We expect that 2024 will see an annual escalation rate of 4% to 4.5%.
Our CIP planning recommendations are as follows:
Please do not hesitate to contact us with any questions or concerns.