The construction industry as a whole has experienced a steep rise in costs over the past years. Chicago, in particular, has been subject to rising construction costs over the last 4 years. These rising costs are the result of many different factors such as a significant labor shortage and rising material costs.
Here we’ll provide you with a breakdown of Chicago construction costs along with details on why costs have been rising.
Since 2004, construction costs have been on the rise from the East to the West coast, especially in some of the country’s largest cities where the most construction is underway.
Costs have risen by 23.6% since 2004. Rising costs and are largely due to a labor shortage which has also played a role in the cost of labor rising. The country’s largest cities have construction costs that are 20-30% higher than most areas in the nation. The cost of construction New York City is up 31.3% when compared to the top 30 largest cities in the U.S., with San Francisco and Chicago trailing behind at 25.6% and 16.8% higher than the top 30 largest cities.
In 2018 alone, non-residential construction costs have risen 1.36% from Q3 to Q4 with a 5.68% increase on the year. Average commercial construction costs are $160-$170 per square foot. To give an additional perspective, the average residential construction costs are now $291,182 or $150 per square foot, nationwide as compared to $237,760 in 2017.
In the current market, Chicago is one of the most expensive cities to build in. In 2017 alone, Chicago experienced a 4% increase in construction costs. with the average residential construction cost being about $290-$349 per square foot based on the cost of a single-family home. The average cost of an apartment or condominium-mid rise building comes in at about $406-$527 per square foot. While the average cost of a high-rise commercial office is usually about $752-$903 per square foot.
Construction in Chicago is booming as if evident by the number of cranes found doting the skyline, but a huge challenge that needs to be addressed is the shortage of construction workers. According to the Commercial Construction Index, over 90% of the 2,700 a total of 2,700 builders, construction managers, and contractor companies nationwide have had difficulty recruiting and finding skilled construction workers. This report states that “the high percentage of contractors who report difficulty finding skilled workers has not abated significantly since it was first reported in Q2 2017.”
One of the main causes of this decline has been attributed to an aging population of tradespeople moving into retirement. The median age of construction workers is 42.6 with only 1.8% of the industry falling between 16 and 19 years old. As cultural trends emphasize the importance of a college education, there has been a large reduction in the number of people entering the trade, contributing to the trends we see today.
On top of this increasingly small talent pool, construction materials and equipment costs are increasing significantly. Steel framing, fire protection, earthwork, and plumbing systems grew 2.2%-3.5% in the second quarter of 2017.
This is in part is due to federal trade tariffs on common construction materials such as steel and lumber. Steel prices alone have increased over 30% from January to September of 2018
Overall, construction costs nationwide have been on the uptrend for 15 years. As contractors and builders find it increasingly difficult to find skilled workers, costs continue to rise. Rising materials costs are also contributing to heightened costs.
We hope this offered you a comprehensive understanding of current construction costs. For any more information or development assistance, reach out to Focus today!