Like the overall economy over the past year, the construction market has been in a state of flux. We thought it would be helpful to provide a quick market update prior to the release of our Q1 2021 Market Outlook report, which will be issued in the upcoming months.

The big picture is that things are changing rapidly in the commodity markets. Looking first at oil, we have seen some volatility over the last year and are currently on an upward trajectory. The long-term trend is back up to where we were pre-pandemic at around $65/barrel. Copper has been steadily increasing over the last year and is experiencing a spike up roughly 16% this past month alone. Wood is up 234% since its pre-pandemic levels, which will have significant impacts on projects using a mass timber structure.

Speaking of structure, there is currently a lot of talk about the price of structural steel. Material prices are up roughly $300/ton since the end of 2020, which will have a major impact on the cost of buildings that are bidding today. In busy markets, the subcontractors will be passing this cost on by increasing their unit prices. In depressed markets, the subcontractors may still try to absorb most of this increase to keep adding to their project backlog. We are projecting that this material cost volatility will continue.

In summary, we are seeing a lot of different things happening all over the country. Depending on where you are and how quickly your region is recovering, you could see cost savings due to increased competition or a cost increase if you are in a busy market. In the North East where things are rapidly picking up, the subcontractors are not absorbing material cost increases and projects could see a 2-3% increase in construction costs. In locations with contracting markets, we are seeing bids still coming in at cost and the subcontractors still absorbing cost increases. If you are bidding on a project now in a contracting market, we would recommend bidding add alternates that can be accepted if cost bidding continues. Finally, all projects that are currently in design should be carrying escalation going forward.