The construction sector has been experiencing a surge of high prices in the period leading up to January 2018. The industry has also continued to experience high costs of building material in the past months. Trade groups have warned that tariffs on steel and other goods could send construction cost shooting even higher.
Increased material costs imply that contractors are not making the proper amount of profit despite the increase in workflow. Despite the price increase and rising labor costs, suppliers of concrete and other materials have announced to increase their prices.
Here you will learn more on the issue of increasing the cost of building materials and how to check it.
Why Material Costs are Increasing
Natural disasters and heightened construction activity are two significant causes of cost increase in construction materials.
Another major contributor to the price increase is an increase in energy and crude oil costs. Crude oil is primarily a significant influencer of the annual price change.
Tariffs also play a vital role, for example, taxes on construction supplies such as steel and aluminum create uncertainty in the marketplace. These supplies are essential for construction projects and cannot be avoided.
Reasons Why Construction Costs Continue to Increase
The rise in interest rates has played a considerable role in maintaining this high annual price increment of building materials. How this works is increases interest rates are predicted to continue increasing throughout the year. The increased interest rates will raise the borrowing costs, and this will inevitably slow construction financial recovery.
Labor Costs and Availability
The labor cost has been steadily rising due to inadequately skilled labor in the construction industry. Less skilled labor can be attributed to the fact that there few young people are perusing the construction trade. Most of them prefer to earn a four-year degree than to learn a trade. Also, the negative stigma of the blue collar has helped create this void. Labor costs have to rise since it is a simple demand and supply case.
Steel can be considered to be the critical material driving up construction cost as its price steadily increases. Economists predict there will be a massive rise in the price of steel as its supply from bankrupt Chinese mills decreases, and this will be very problematic.
The rise in steel prices and a reduction in its demand is forming a steel crisis. Five major steel-related products are becoming more expensive due to the steel crisis. Such products include security wire fencing, elevators, nails, forklifts, and demolition machinery and equipment.
How To Fight The Rising Cost Of Construction
Plan Around Industry Trends
Here contractors try to take advantage of good weather during construction. They maximize the use of good weather to avoid having to do projects in bad cold weather. Some construction techniques and projects cannot be implemented in the cold, so such projects are planned along the winter months. You should not wait too long into the spring to bid your projects since this is when most contractors are booked, and seasonal cost escalation starts.
Embracing prefabrication will lead to industries operating efficiently and reduced waste. The use of prefabricated material implies that the building components are designed offsite by a different company. Designs are carefully coordinated in advance so that only what is needed is bought.
A notable benefit of offsite building is that you reduce labor cost, which will lower the construction cost, especially since labor cost has been increasing rapidly. Also, if there is an expected labor shortage, the use of prefabricated materials reduces the need for labor so you will not be affected by the shortage.
Use Of Construction Field Management Software
There a lot of technological advancements these days, and the use of technology to reduce the cost of building materials and the cost of the project, in general, is a good idea.
Field software are available in various designs, you need to find one that works for all applicable parties, and has open access to all parties via cloud-based storage and sharing.
Another feature you should look for in a field management software is the ability to support different operating systems. Also, keep things simple since not everyone has the same technological know-how as you do. Every involved party needs to understand the software and how to use it.
Plan With Building Information Modeling (BIM)
BIM is a computer-aided design that shows a comprehensive visualization of construction projects at every stage in the process. BIM allows you to evaluate every design step so that you figure out exactly what the result will be.
This technology helps calculate the total cost of materials in case of a design change, and an accurate estimate of the building materials cost can be drawn at the moment. BIM can be used to complement prefabrication and eventually to enhance both processes. BIM ultimately saves you money despite the rising cost of construction materials.
As the busy construction season continuously shoots up, the demands for construction materials will move on up as well will the prices of the materials. A savvy developer will find a way to deal with it and reduce production cost.
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