KCRag Forum

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A recent report by Jones Lang Lasalle Inc. (NYSE: JLL) found, through August, average final construction costs for a commercial project had increased 4.5%. Total cost growth by year-end is likely to surpass 6% and, in 2022, cost increases between 4% to 7% are projected.
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But once the pandemic backlog catches up, and if construction costs continue to escalate at, say, double-digit percentage increases, projects could start to not pencil out.

"That may begin to become more of an issue going into next year," D'Esposito said.

One of the biggest challenges that has faced general contractors and, as a result, developers and tenants has been trying to predict which material is facing a shortage or pricing issue at any given time. For months in the first half of 2021, lumber was seeing price surges. More recently, pricing has moderated for lumber, but steel has become a bigger headache.
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Lisa DeNight, national industrial research director at Newmark Group Inc. (NASDAQ: NMRK), said construction costs and shortages are probably the most critical issue facing industrial real estate developers right now. She said, anecdotally, she's heard of some developers canceling or significantly delaying planned projects because they cannot guarantee timing.
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