“Earlier this year, our President, Peter Douglas, posted a Blog pondering the question of how much construction prices would go down as a result of the impacts of COVID on our industry. At the time of the Blog (May 27, 2020), we were beginning to witness the relaxation of construction material prices, particularly lumber and subcontractors cutting their prices to book work for the unknown times that lie ahead. It was thought that this trend would continue during the pandemic and that overall construction prices could retreat 3-5%, a welcomed projection for many developers. Unfortunately, prices have not gone down the 3-5% as originally speculated. So what happened?
In the months following the posting of that blog, prices for construction materials and manufactured commercial building products increased due to the impact COVID had on production and transportation, compounded by demand, which remained relatively high throughout the pandemic. An unexpected rise in home construction and renovations, driven by low-interest rates, increased disposable income (reduced household entertainment expenditures), and the impact on “work from home” are significant contributors. Some materials increased significantly, putting many projects in jeopardy of being postponed (see TDC’s Blog on August 27, 2020). As we move into 2021, many subcontractors continue to price work more competitively; unfortunately, we see these price reductions offset by the rising cost of materials.
Manufacturers of PVC, drywall, metal studs, insulation, windows, doors, and many others have announced 2021 price increases ranging from 5% on the low side to up to 20%. Will these increases retreat over the course of the year? Will the labor markets remain competitive enough to offset these increases? The unpredictability of 2020 makes the prediction for 2021 difficult to make; however, I anticipate overall construction prices are going up for 2021.”
Jeremy Bartolovitch
Vice President of the Southeast Region
The Douglas Company
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