Construction Cost Increase – 2020 Changed Everything

Construction Cost Increase – 2020 Changed Everything

Are you getting sticker shock from your building materials purchases since 2020? You’re not alone. The entire country is struggling under painful supply chain strain. Costs are growing to frustrating levels and the changes are hurting the bottom lines of effectively every industry.

This dramatic shift is happening for a few key reasons:

Manufacturing Issues

Manufacturing shifted significantly in 2020 due to Covid-19 and the various lockdowns. Not only were facilities producing at a lower capacity due to safety restrictions, manufactures were not incentivized to keep a normal level of production because future economic stability was so uncertain.

As the economy shifted back to normal, the manufactures decided to test the limits of the market, driving prices higher and higher to see if builders continue to pay the premiums. With limited supply line options, builder’s only option was to pay.

Freight Industry Boom

As the world quarantined during 2020, a huge amount of brick-and-mortar stores went out of businesses. Online shopping grew and so did shipping.

As the economy bounced back, the demand for shipping continued to grow to well above pre-pandemic levels and well above the infrastructure capacity. The limited amount of shipping space drove up the cost to move construction material.

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Housing Rush

The Fed has also contributed to the construction materials cost increase. They made interest rates low to stimulate the economy, but the changes had effects elsewhere.

With interest rates at rock-bottom, people across the country rushed to buy houses to take advantage of low mortgage rates.

High housing demand enticed residential developers to build more and more, raising the demand for materials and thus raising the cost.

This effected the entire construction industry – both residential and commercial.

How to Manage

With all of the 2020 changes causing a disruption in in construction material costs, there are several adjustments you can make to help keep your construction costs competitive.

Purchase Locally

Buying materials for projects from local vendors is a way to bypass some of the current global disruptions and supply chain strain. Not every local vendor will be cheaper, but they may be more available for the specific materials you need since they don’t have to ship it long distances.

Find Other Ways To Cut Costs

When materials are costing more than budgeted, you have to find ways to adjust your budget elsewhere to achieve your goal profit.

At BE-CI, we help our clients save money through our various services. We help them avoid costly oversights through inspection, testing, and our contractor network.

Inspections and testing helps avoid costs incurred through water-intrusion and external damage, and our contractor network helps our clients find affordable bids for their projects.

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Final Thoughts

The construction industry is facing a unique supply chain and price strain, but builders, managers, and everyone involved has to find a way to adjust and adapt to the construction cost increase 2020 brought us.