Construction Costs Dip for the First Time in a Decade

It should come as no surprise to know that COVID-19 has shocked economies around the world. Every industry has been impacted in some way or other, even construction.

If you lead a construction firm, are a contractor, or work for one, you are probably aware of the lack of demand for jobs. You have probably also noticed a decrease in prices for supplies, or have found it challenging to find used concrete forms for sale or other materials you need.

Here is how the decline in construction costs is affecting contractors and construction firms.

How construction is being affected

The pandemic has caused economic uncertainty, which has triggered a domino effect in the construction industry. Commercial developers are putting construction on hold, unsure if they will have the funding to support new projects while keeping their businesses afloat.

Turner Construction Co., which has forecasted construction costs for more than 80 years, reported that the nonresidential building construction market fell in value in its quarterly Building Cost Index. This is the first time in ten years the index has seen a decline.

In a recent press release, the vice president of Turner Construction, Attilio Rivetti, said, “Trade contractor competition has increased in many areas as they work to secure backlog due to uncertainty that have about future opportunities.” As more companies and contractors bid on projects, costs for construction projects decline. This means contractors are also likely to see a reduction in their profits.

The lack of jobs available is causing firm leaders and contractors to be reasonably concerned over the demand for their services. Some might worry about the ways to get payment from other contractors due to the lack of demand for their services. Many are wondering what their workload will look like by the end of 2020.

How supplies are affected

The decrease in demand for construction jobs has also caused the costs of materials, like concrete formwork ties, to decrease. While the price drop is helpful for those buying materials for current jobs, there are signs that the price of supplies will increase as demand for jobs picks up.

GEP reported that failure to contain the coronavirus’s spread might lead to a rise in domestic materials supplies because exporters from other countries may not be able to ship to other locations. This could also affect imports, though, which may cause unpredictable price fluctuations for certain supplies.

How contractors are feeling the impact

While there has been an overall decline in construction costs, available work may be different depending on where you work.

For example, a two-person firm in the Northeast expressed that it has been very difficult to find subcontractors to bid on new construction or renovation projects. Whereas a 140 person firm in the West shared that their construction activities have continued, but they have seen additional costs because of the virus. These extra costs have caused some of their projects to slow down, pushing back their projected completion date.

According to the Associated Builders and Contractors second-quarter report, construction firm leaders expect sales to increase by the end of the year. However, they also anticipate seeing much slimmer profit margins. Less than 30% of contractors believe they will see their profit margins rise before the new year.

Remaining hopeful

Few contractors have reported that their job creation plans increased. Construction firm leaders are hopeful that they will see their sales increase in the next several months, but they also expect their profit margins to be low for the year.

It is helpful that construction has been deemed “essential” throughout the pandemic, which has allowed leaders and CEOs of firms to adapt to new procedures because of coronavirus. While the changes in practices have made some firms feel the effects more than others, it is still beneficial for construction companies to remain open during this time.

How Forming America can help

Whether you run a construction firm or work for one, you need reliable resources to keep your business running. And finding a reliable partner in this time of uncertainty should be one less thing you need to worry about. Forming America is a partner you can depend on. Contact us today for your supply needs or to sell us your used materials like concrete.