{"id":11769,"date":"2023-02-24T14:51:29","date_gmt":"2023-02-24T20:51:29","guid":{"rendered":"https:\/\/manhattanconstructiongroup.com\/manhattan-construction-company\/?p=11769"},"modified":"2023-02-27T15:05:19","modified_gmt":"2023-02-27T21:05:19","slug":"anticipated-construction-cost-and-supply-chain-trends-in-2023","status":"publish","type":"post","link":"https:\/\/manhattanconstructiongroup.com\/manhattan-construction-company\/anticipated-construction-cost-and-supply-chain-trends-in-2023\/","title":{"rendered":"Anticipated Construction Cost and Supply Chain Trends in 2023"},"content":{"rendered":"

The market is ever-changing, as are the solutions. Our preconstruction teams stay in touch with trade partners, including vendors, suppliers, and subcontractors, to keep a pulse on market conditions and opportunities to help our clients.<\/h2>\n

Our team analyzes market costs and lead times across all trades nationally and internationally. Because we have broad market visibility, we can develop and identify strategies to protect and insulate our clients from escalation and supply chain challenges to help them achieve their goals.<\/p>\n

For example, our preconstruction specialists assess material supplies and advise engineering and design teams on options. In a recent project, the availability of a specified breaker was limited, which would have negatively impacted the cost and schedule of the project. Our electrical preconstruction specialist advised the design team on options, which included suggesting a different size breaker. It was an upsized breaker for the need but cost the same as the originally selected breaker. The benefit of the higher capacity breaker was that it was much more readily available, which helped the project schedule.\u00a0For any given project, our team\u2019s early engagement may identify many opportunities like this one, which together can have a huge positive influence on the ease and success of a project.<\/p>\n

2022 proved to be a challenging year for cost and supply chain issues. Read Manhattan\u2019s 2022 YEAR-END REPORT<\/a>. Entering 2023, our team anticipates this year having its fair share of challenges.<\/p>\n

Although many trades appear to level off related to escalation and supply chain concerns, we still anticipate cost and supply issues with mechanical, electrical, and plumbing trades in 2023.\u00a0Labor shortages are expected to continue for all trades.<\/p>\n

Every year various trade groups and organizations publish forecasts and predictions for the year.\u00a0Below, we\u2019ve summarized some of the major themes present in the industry data.<\/p>\n

AIA Forecast: AIA Consensus Construction Forecast<\/a><\/h2>\n

Reflecting on 2022, total non-residential construction spending grew significantly. The AIA\u2019s Consensus forecast anticipates another strong year for the overall sector.\u00a0 Digging into the details, commercial office construction is expected to decline, largely influenced by a market flush with leasable office space, with many companies continuing work-from-home policies.\u00a0 Hotel construction is expected to grow at 9.5%, in contrast to the last few years of limited investment in the sector.\u00a0 Industrial construction is expected to grow at 15%, continuing strong growth in 2022.\u00a0 All institutional construction segments (health, education, public safety, amusement, and recreation) are expected to see healthy growth, except for religious construction, which is shown to be contracting.<\/p>\n

Dodge 2023 Outlook: Construction Outlook 2023<\/a><\/h2>\n

The Dodge forecast presents a much more bearish picture of 2023 when compared to the AIA Consensus.\u00a0 Key highlights include a 6% decline in single-family construction, an overall decrease in commercial construction with data centers being a bright spot, a sharp contraction in manufacturing construction, positive growth in healthcare construction, significant growth in non-building construction (roads, bridges, general infrastructure), driven by the 2021 Infrastructure Investment and Jobs Act.<\/p>\n

Stream Realty Partners: Will 2023 Be As Bad As Everyone Thinks?<\/a><\/h2>\n

Continuing the bearish theme of Dodge, Stream reviews the chances of a 2023 recession, including the impact of \u201cThe anxious index,\u201d highlighting the historical precedent of seeing an inverted yield curve, and a review of \u201cThe Sahm Rule.\u201d\u00a0 This report quotes Yogi Berra, \u201cPredictions are hard, especially about the future.\u201d<\/p>\n

J.P. Morgan Market Outlook:\u00a0 2023 Market Outlook<\/a><\/h2>\n

The J.P. Morgan report is an expansive economic forecast, including aspects that fall beyond the scope of construction economics. It includes insights related to inflation and commodities. Although J.P. Morgan is by no means bullish, the general sentiment is much more positive than the bearish themes of both Dodge and Stream.\u00a0Regarding inflation, the outlook reflects a rather positive indication reporting that the \u201cGlobal Consumer Price Index (CPI) inflation is on track to slow toward 3.5% in early 2023 after approaching 10% in the second half of 2022.\u201d This is welcome news to anyone in a purchasing role, as inflation was a near-constant bedfellow throughout 2022.\u00a0 On the commodities front, J.P. Morgan is anticipating an $83\/ barrel price for West Texas Intermediate (trending between $75-82 as of writing in January of 2023).\u00a0 The report also highlights continued price reduction amongst base metals with a forecast of increases in Q4.<\/p>\n

Deloitte:\u00a02023 engineering and construction industry outlook<\/a><\/h2>\n

The introduction to the Deloitte report highlights the CHIPS Act noting the $50+ billion-dollar influx of cash into the domestic technology manufacturing industry.\u00a0The report provides a high-level overview of how inflation and high-interest rates contribute to the market uncertainly. The report highlights the persistently high rate of job openings, which is continuing to apply wage pressure on employers as there are simply not enough hands to do the work available to contractors.<\/p>\n

ENR (Subscription Required):\u00a0 4Q Cost Report<\/a><\/h2>\n

The ENR Cost report shows some very positive news for those in the non-residential building sector.\u00a0 Most notable is their forecast for Material Cost Index (MCI).\u00a0 In 2022, the MCI showed an 18.6% increase, this index is forecasted at 1.3% for 2023.\u00a0The overall Building Cost Index is forecasted at 3.8% in 2023.\u00a0On the material side, ENR is forecasting continued price increases of cement, while steel products are anticipated to continue their downward trend. After an extremely volatile 2021-22, lumber prices are anticipated to stabilize largely due to falling demand from the single-family residential sector.<\/p>\n

Association of General Contractors:\u00a0Construction Inflation Alert<\/a><\/h2>\n

This report is the 9th<\/sup> issuance of the construction inflation report instituted in Q1 of 2021 due to construction economy shocks from the outbreak of COVID.\u00a0 This report along with the eight previous ones serves as one of the most useful sources of information on the state of the Construction Economy.<\/p>\n

Regarding supply chain issues, the report conveys positive news with relative availability of most timber and steel goods. On the down side, the report reflects continued bottlenecks on anything with a computer chip and continued shortage of labor, which will likely lead to increasing wages for labor in 2023.<\/p>\n

Notably, the report provides advice to owners related to the current market conditions: \u00a0\u201cOwners need to recognize that fast-changing materials costs and availability require a quick decision regarding bids and requests for changes. For new and planned projects, owners should expect quite different pricing from previous estimates. They may want to consider building in more flexibility regarding design, timing, or cost-sharing. Contractors need, more than ever, to closely monitor costs and delivery schedules for materials and to communicate information with owners, both before submitting bids and throughout the construction process. Materials prices do eventually reverse course. Owners and contractors alike will benefit when that happens. Until then, cooperation and communication can help reduce the damage.\u201d<\/p>\n

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The market is ever-changing, as are the solutions. Our preconstruction teams stay in touch with trade partners, including vendors, suppliers, and subcontractors, to keep a pulse on market conditions and opportunities to help our clients. Our team analyzes market costs and lead times across all trades nationally and internationally. Because we have broad market visibility, … <\/p>\n

Continue reading “Anticipated Construction Cost and Supply Chain Trends in 2023”<\/span><\/a><\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[21,228],"tags":[],"class_list":["post-11769","post","type-post","status-publish","format-standard","hentry","category-news","category-precon"],"acf":[],"yoast_head":"\nAnticipated Construction Cost and Supply Chain Trends in 2023 - Manhattan Construction Company<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/manhattanconstructiongroup.com\/manhattan-construction-company\/anticipated-construction-cost-and-supply-chain-trends-in-2023\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Anticipated Construction Cost and Supply Chain Trends in 2023 - Manhattan Construction Company\" \/>\n<meta property=\"og:description\" content=\"The market is ever-changing, as are the solutions. 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