Material Prices Increase at Unprecedented Levels

By Granger Hassmann, Vice President of Preconstruction and Estimating for Adolfson & Peterson Construction

The construction industry is still suffering from the ripple effect of the shutdowns that occurred early in the pandemic, which halted construction material manufacturing across the globe. Construction projects that were already underway quickly absorbed existing material inventories.

Though much of the manufacturing has come back online, the shortage of construction materials persists. Demand for construction materials far exceeds supply, leading to increased costs, according to JLL’s construction outlook for the second half of 2021.

In fact, the volatility in construction material prices experienced this year is unprecedented in contemporary history. Lumber and steel price increases are the largest recorded through available government data since 1949. For other commodities, the record pricing is somewhat more recent: aluminum prices have not increased this fast since 1995, plastic since 1976, and copper since 2010.

Average material prices for a commercial project increased an astounding 23% in the 12 months prior to August 2021, according to JLL Research and the U.S. Bureau of Labor Statistics. It’s worth noting, however, that some materials may continue to have limited supply, which will keep costs up. For example, roofing manufacturers aren’t in a position to take orders until late 2022.

AP is doing a number of things to mitigate the increased cost of materials:

• Work with owners and consultants to create designs that align with procurement schedules and material lead times
• Explore alternate material manufacturers of equal value and function
• Explore alternate building assemblies and systems of equal value and function
• Establish new relationships with trade partners that have materials in hand
• Secure large material orders at project kick-off (which isn’t typical) to avoid future price increases
• Find warehouse space needed to store materials

Over the next several months, AP expects prices to continue to increase before plateauing by Summer 2022. As organizations across the U.S. continue to want to build new projects due to low interest rates, it’s up to AP to educate our clients on the upfront and long-term financial impacts of material costs and supply chain issues.

And even though no one can truly predict market demand, AP diligently fosters trade partner relationships and frequently meets with them to discuss market indicators, keep information flowing, and keep clients updated on changes that occur daily.