Cost of Construction Materials to Remain High

The good news for the construction industry is that the market is beginning to have some semblance of what it looked like prior to the pandemic. Most of the halted projects during 2020 have either been built or are in the process of construction right now. On the surface, it appears as if the construction industry has returned to normal, with the exception of one thing – cost.

Across the board, the prices of building materials have increased – some much more than others. General contractors could only watch on as the price of materials rose nearly 20% in 2021. From this past November through March, we witnessed a massive increase of 10.6 percent in that short span.

Inflation is a constant, no matter what industry you are in, but the unprecedented levels in the construction industry has general contractors rethinking not only how they source their materials, but how they build their projects. The cost of certain building materials has risen exponentially compared to others. Atop the list is steel pipe and tube, which has increased nearly 60% from one year ago. Copper and lumber aren’t very far behind at nearly 50 percent, with metal bar joists just over 40%. 

Just as signs of recovery from the pandemic began to show, another global issue took hold of the construction industry. The ongoing war in the Ukraine has created yet another hurdle for general contractors when it comes to the cost of building materials. The rising cost of fuel has translated to higher shipping costs and delivery delays. When you add in recent natural disasters and the various supply chain issues, the construction industry has seen a “perfect storm” when it comes to material costs. 

Multi-Building Development in Haltom City, Texas, Complete

Dallas (August 19, 2021) – LGE Design Build, a full-service commercial general contractor with an in-house architecture firm, recently completed construction on 820 Exchange in Haltom City, Texas. 

820 Exchange is a four-building development that is made up of nearly 1 million square feet of industrial distribution space and features clean-cut modern design, state-of-the-art industrial amenities and first-rate access to key transportation routes. 

Aerial footage of 820 Exchange.

This best-in-class, multi-building development has top-of-the-line industrial amenities. It has best-of-market clear height and loading area dimensions, complete with contemporary finishes. The office entrances on each building are clad in a Texas limestone, adding a raw aesthetic to the structure. The limestone bricks used in the construction were sourced from local quarries.

Watch 820 Exchange being tilted.

“I am proud of our construction team for completing this massive project on time, in spite of many challenges,” said Grant Blunt, Vice President of Construction for LGE Design Build. “Not only did we complete this project during the COVID-19 pandemic, but we also had to endure the Texas power crisis and corresponding freeze in February and develop creative solutions to stay on track after numerous rain delays. We would not have been able to shift and adapt to these challenges without the collaboration we saw from our construction teams, subcontractors and the City of Haltom.”

Located between Beach St. and Haltom Road, just south of Interstate 820, the business park has near immediate highway accessibility and is only four miles north of Fort Worth’s bustling downtown. Haltom City has been named as one of the fastest growing and fourth largest metro areas in the U.S. 

LGE Design Build served as the general contractor on this project. LGE Design Group was the architect. 

Supply Chain Outlook for General Contractors

In 2022, the demand for commercial construction has nearly returned to pre-pandemic levels. General contractors are beginning to fill backlog orders from the hiatus created by COVID-19. Fortunately, most of those projects are, once again, underway. However, while developers have regained their confidence in the market, issues with the supply chain continue to persist. 

As the first major shut down gets further away in our rearview mirror, more obstacles have begun to surface. The combination of several major factors have ensured that the supply chain issue will continue for at least the next two quarters. 

Bottlenecks have emerged at major U.S. ports, including Los Angeles and Long Beach, where a large portion or our imports are processed. This has severely impacted “just-in-time” deliveries for general contractors, who became accustomed to receiving materials right around the time they were needed for projects. 

One unanticipated effect of the pandemic was seeing so many older workers opt for early retirement. General contractors not only saw the size of their crews dwindle, but trucking companies were forced to slow their operations because of driver shortages. With a limited amount of drivers, deliveries were delayed, or in some cases cancelled altogether. Compound this issue with the recently skyrocketing price of gas, and the delivery of construction materials has not only become more difficult, but it has also become much more expensive.

It’s abundantly clear, at this point, that there is no overnight solution to this issue for the general contractors. However, the recently passed Infrastructure Investment and Jobs Act includes $17 billion to be allocated toward port infrastructure and waterways. President Biden has also negotiated a deal with the Ports of Los Angeles and Long Beach to operate on a round-the-clock schedule to alleviate as much of the backlog as possible. 

In the meantime, all general contractors can do is be transparent with their customers about this fluid situation and continue to be conservative on any timeline expectations for their new construction projects.