Dive Brief:
- The Turner Building Cost Index rose 5.2% year over year in the second quarter, providing further evidence that construction costs are increasing on an annual basis, even as monthly numbers offered a momentary reprieve.
- The construction cost yardstick from New York City-based Turner Construction, the industry’s largest contractor by revenue, increased 1.4% from the first quarter as high-growth sectors drove demand for both labor and materials, according to a July 24 news release.
- "Demand remains strongest in data centers, semiconductors, advanced manufacturing, and mission-critical facilities, particularly in the Midwest and Southeast,” Attilio Rivetti, Turner’s vice president responsible for compiling the index, said in the release. “The industry's biggest challenge continues to be the availability of skilled Mechanical and Electrical labor.”
Dive Insight:
Monthly costs have whipsawed recently. In June, nonresidential input costs decreased 1.1% month over month, according to the latest data from the U.S. Bureau of Labor Statistics. But that dip came after a 2.6% month-over-month surge in May, a jump that helped spur the fastest annual increase since the pandemic.
Those fluctuating results mean contractors have to approach estimates for potential projects with even more scrutiny, as global uncertainty and changing tariff policies at home create an ever-shifting target for input prices. Just last week, President Donald Trump announced a 50% tariff on key imports from Canada set to go into effect Aug. 19.
Then on Wednesday, the Federal Reserve held interest rates steady; however, three members dissented, citing inflation remaining above 2% for over five years, CNBC reported.
“Looking ahead, owners and contractors will be watching material costs, tariff policy, and supply-chain conditions closely,” Rivetti said in Turner’s release. “Uncertainty in these areas reinforces the importance of disciplined planning, early procurement, and proactive risk management as projects move forward.”
Turner has tracked its own construction cost forecast for more than 80 years based on national conditions it sees on its own projects, including labor rates and productivity, material prices and the competitive condition of the marketplace. For those reasons, the contractor says it doesn’t necessarily conform to other published cost indices.
