The New York construction market continues to gain strength, primarily due to strong residential development, according to Rider Levett Bucknall North America research.
Construction costs have increased by approximately five percent over the last year as contractors are starting to develop backlogs of projects for the first time in several years.
Large mixed-use developments — such as the Hudson Yards Redevelopment Project, touted as the largest private real estate development in the U.S. — have also energized the construction industry.
Rider Levett Bucknall expects continued industry growth in the New York market over the next two years.
The international property and construction consultants reported that nationally, construction costs incdreased by 1.15 percent in the first quarter of 2014, the largest since July 2008.
According to Rider Levett Bucknall’s research, for the past six years overall construction costs have been relatively flat and are now beginning to show evidence of spiking. These increases result from a variety of factors including increased construction activity, easing of general contractor price compression, and the availability of labor and sub-trades.
Rider Levett Bucknall tracks construction costs in 12 major U.S. cities, which overall experienced an average increase of 1.15 percent between January 1, 2014 and April 1, 2014: Honolulu and Portland had the highest quarterly increases at 3.81 percent and 1.48 percent respectively. All other locations experienced gains ranging from 0.61 percent (Las Vegas) to 1.01 percent (Washington D.C.)
The firm’s research further indicates that the housing sector will continue to lead increases in new construction throughout 2014.
Additional sectors expected to see gains in new construction include educational and institutional buildings; commercial buildings; healthcare; and manufacturing facilities.
Despite growing optimism surrounding the U.S. construction industry, Rider Levett Bucknall’s report notes that some A/E/C firms have lingering concerns regarding employee shortages, rising employment and construction costs, and the impact of recent federal budget cuts.
Furthermore, lack of skilled labor will create a strain on the construction industry in some regions. In those regions with limited skilled labor, the problem may be exacerbated by large-scale projects draining resources from smaller projects.
“Developers will need to devise different strategies to overcome rising costs to try to get ahead of them,” said Grant Owen, senior vice president of Rider Levett Bucknall North America in New York.
“Strategies may range from introducing LEAN design and construction techniques, to adopting different procurement processes, to analyzing project scope, to using alternative construction materials and methodologies.”
