High Level of Construction Activity in Urban Areas Drives Increase in Costs

Turner Construction Company announced that the Fourth Quarter 2014 Turner Building Cost Index — which measures costs in the nonresidential building construction market in the United States — has increased to a value of 917. This reflects a 0.99 percent increase from the third quarter 2014 and a 4.45 percent increase from the fourth quarter 2013.

“Growth in nonresidential construction was steady in the fourth quarter in virtually all domestic markets,” said Attilio Rivetti, the Turner vice president responsible for the cost index. He continued, “Higher construction cost escalations in urban centers with increased construction activity, as well as selective mega-projects, are driving the average domestic construction cost increases.”

Labor resources are constrained in markets experiencing increased volumes of construction activity. The labor cost component in those markets is adding to the upward pressure on construction costs.

Raw material prices have seen slight increases, while manufactured and engineered construction components have seen more significant increases with longer lead times for delivery. Declining fuel costs have helped offset some of these increased costs.

Approximately 90 percent of Turner's business is performed under contract arrangements where Turner provides extensive preconstruction planning services before the contract price is fixed and before construction starts. By providing preconstruction services and utilizing enhanced procurement strategies, Turner effectively manages the market risks associated with cost-related issues.

Turner has prepared the construction cost forecast for more than 80 years. Used widely by the construction industry and federal and state governments, the building costs and price trends tracked by the Turner Building Cost Index may or may not reflect regional conditions in any given quarter. The Cost Index is determined by several factors considered on a nationwide basis, including labor rates and productivity, material prices and the competitive condition of the marketplace. This index does not necessarily conform to other published indices because others do not generally take all of these factors into account.