The U.S. construction industry continues to grapple with numerous challenges, including labor shortages, supply chain disruptions and higher materials costs. This report includes a proprietary CBRE Construction Cost Index that forecasts costs through 2024. We dissect the underlying elements of construction costs—labor, materials and margins—and identify factors driving them higher.
Key Findings
• CBRE’s new Construction Cost Index forecasts a 14.1% increase in construction costs this year due to rising labor and material costs. Annual increases should return to the historical average of between 2% and 4% in 2023 and 2024.
• Overall cost inflation for materials is expected to begin easing by the end of 2022 and largely return to typical levels by mid-2023.
• Supply chain-related disruptions should begin to ease, but ongoing labor and component shortages will impair production and logistics capacity.
• Labor availability is expected to remain tight for the near term, putting pressure on wages. Construction wage growth likely will be higher than average U.S. wage growth this year.
• Considerable pent-up demand for new construction, particularly for housing, along with government infrastructure projects, should buoy construction activity.
