CRE N Illinois

Counting cranes: construction costs and confidence

Counting cranes: construction costs and confidence,ph1

Construction costs are rising, but that hasn’t stopped new development as the North American crane count has reached a new peak. Chicago and five other cities—of the 13 cities sampled in Rider Levett Bucknall’s (RLB) latest tally—are holding steady from the July report, while five cities show an increase in counts and only two have indicated a decrease in activity.

The number of cranes in Chicago remains steady, with high-rise residential and mixed-use towers remaining the dominant sectors. There is a sign of continued growth in the hospitality sector as cranes are rising in six new locations; commercial office towers account for three locations and healthcare facilities for two. Developments in the South Loop and West Loop are continuing to thrive, and comprise almost half of the cranes currently in the city’s skyline.

The increase in net crane count indicates that the construction market is not merely holding steady, but prospering. It is anticipated that this growth will continue through 2018, as many cities continue to add to their roster of proposed developments.

And as RLB’s fourth quarter 2017 North America construction cost report shows, construction costs are on the rise virtually everywhere. Factors include natural disasters like Caribbean hurricanes as well as mudslides and wildfires on the west coast. Labor shortages only compound the strain that these other factors create.

“If the construction labor force is generally unable to afford living in the places where their services are most in demand, employers will eventually increase wages to attract workers—but at this point in time, this has not yet been fully realized,” said Julian Anderson, chairman of RLB Global Board of Directors.

Construction costs rose in Chicago 5.53 percent annually, the largest increase outside the west coast. Portland saw a 5.76 percent change while Los Angeles and San Francisco suffered 7.08 and 7.63 percent increases, respectively.

The steady number of cranes across the country are not indicative of the industry’s general outlook. According to Engineering News-Record’s Construction Industry Confidence Index, sentiment has risen from the lows of the recession. However, a recent peak in the first quarter of 2017 dropped off by ten points in the third quarter.

“Surveys show that long-term industry confidence is slipping, for reasons that are largely rooted in Washington D.C.,” Anderson said. “The long-promised infrastructure initiative seems to have slipped off the federal agenda, and may be headed to the individual states to implement.”