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Construction Cost Increases Are Easing, According to Index
Construction costs increased slightly in the Fourth Quarter, according to the Turner Building Cost Index. At 876, the Fourth Quarter 2007 index value represents a 1.51 percent increase in construction costs over the Third Quarter 2007 and a 7.09 percent increase over the Fourth Quarter 2006 index.
The Building Cost Index is determined by several factors considered on a nationwide basis: labor rates and productivity, material prices and the competitive condition of the marketplace.
Increases are driven by demand for materials and labor in addition to increased energy costs, says Karl Almstead, the vice president responsible for the Turner Building Cost Index.
“Activity in the non-residential construction market remains strong in spite of the residential mortgage sub-prime issues and concerns over its impact on the credit markets. In many markets, the large volume of work has stretched the available labor and trade contractor resources driving construction cost increases. From the materials perspective, commodity prices have eased slightly over the past quarter, but global demand, especially from the emerging economies, continues to drive an upward trend in prices,” Almstead says.
Industry resources better support the current slower activity levels, though the factors that created rapid growth over the last three years remain in the market, Almstead says.