Construction Costs Eased in 2015

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Englewood, Colo.—Higher construction costs have been making things tough for developers in recent years, especially in expanding property sectors such as multifamily. There are some recent indications, however, that the increases are slowing down or even reversing.

Consultancy IHS and the Procurement Executives Group (PEG) reported on Monday that construction costs fell again in December. The headline current IHS PEG Engineering and Construction Cost Index came in at 41.8 this month, down from 43.7 in November, and at the lowest reading for 2015.

The headline index remained consistently below the neutral mark of 50 in 2015, indicating that costs have declined throughout the year. A higher reading higher than 50 represents upward pricing pressure, while less than 50 represents downward pricing pressure.

The current materials/equipment price index slowed to 37.8 in December, down from 40.5 in November, the lowest level since the survey began four years ago. All underlying material and equipment components showed falling prices except ready-mix concrete, which showed neutral prices. Copper-based wire and cable registered the highest drop compared to last month, moving from 42.5 in November to 27.5 in December. Transformers, fabricated structural steel and exchangers price indexes also dropped compared with November.

Finally, the companies’ subcontractor labor index remained unchanged in December at 51.1. The sub index recorded its lowest level ever in October, and since has remained just above neutral.