U.S. construction costs are set to increase by 3-6% in 2024, following an average increase of 4% in 2023. Cost escalation will challenge construction firms, which will need to develop new processes and capabilities to keep costs under control and projects on track.
The findings are shared in How to navigate 2024: Balancing challenge with opportunity, a report published by Currie & Brown. The company also forecasts significant variation in cost escalation between major cities. For example, construction costs in Chicago, Illinois are predicted to rise 3.5% in 2024, compared to 6% in Phoenix, Arizona. This means that a $10-million project built in Phoenix in 2023 will cost $10.6 million this year, while the same project built in Chicago will cost $10.35 million.
To help organizations navigate uncertainty and be more cost effective, the report advises project teams to act in the following areas:
- Adopt new ways of working, such as modular construction. This will help reduce the impact of local skills and materials shortages, giving greater certainty on construction costs. Close collaboration between developers, consultants and contractors will also lead to greater clarity on schedules so that skilled labor can be secured early.
- Incorporate sustainability at every stage. Firms need to consider the carbon impact of projects at every stage of development to make sure these will meet current and future standards. Doing so will reduce the need for organizations to make further investments down the line. They will also benefit from operational efficiencies sooner, reducing the cost and whole life carbon impact of their estates.
- Embrace digitization. From AI to advanced data analytics, digital technologies are offering new ways to enhance project ROI and predict and manage future challenges. Organizations must be open-minded to the potential of new technologies and work together to apply them where they will add the most value to projects.
The U.S. is not alone in experiencing spiraling construction costs. The firm predicts cost increases across every one of its operating regions in the year ahead. The extent of these varies from market to market, but common drivers are clear:
Geopolitical turmoil introduces uncertainty to the U.S. economy. Federal Reserve decisions on interest rates will impact construction project financing, while the upcoming presidential election could alter costs and trends in the construction industry.
Inflation relating to construction goods has been on a downward trend. According to Federal Reserve Economic Data, costs increased by less than 1% in 2023. Anticipating a post-pandemic normalization, a 2-3% increase is projected in project material costs for 2024.
Sustainability rules are tightening globally. Last year, California took the lead by enacting two groundbreaking climate disclosure bills – The Climate Corporate Data Accountability Act and The Climate-Related Financial Risk Act. Although adhering to these new regulations may temporarily increase costs, the broader trajectory involves simultaneous decarbonization and long-term operational cost reduction.
Skills and materials shortages are driving cost increases nationwide. Record-low numbers of skilled journeyman and apprentices amplify the challenge. As U.S. construction activity remains strong, heightened competition for labor has bolstered union bargaining power. Project teams are creatively incentivizing and offering bonuses to retain limited resources. As skilled labor shortages persist in the U.S., a 3-6% increase in labor costs is projected for 2024.
About the research
The figures within the report have been extrapolated from regional sources that reflect escalation and growth cost at the time of publication in February 2024. No assurances are given that any future results or events will be consistent with any views, forecasts, advice, anticipations or expectations within the report.
Cost escalation forecasts for specific cities in U.S.
| City | 2024 Cost Escalation |
| Chicago, Ill. | 3.5% |
| Houston, Texas | 4% |
| Miami, Fla. | 4.5% |
| Minneapolis, Minn. | 4.5% |
| New York, N.Y. | 4% |
| Phoenix, Ariz. | 6% |
| Portland, Ore. | 5% |
| San Francisco, Calif. | 4.75% |
| Seattle, Wash. | 4.5% |
| Washington, D.C. | 4.75% |
Global cost escalation statistics
| Market | 2024 Cost Escalation |
| United Kingdom | 3-3.8% |
| Europe | 4-6% |
| Hong Kong | 2.5-3.5% |
| China | 1.8-2.3% |
| Japan | 10-20% |
| India | 5-7% |
| Australia | 5.5-6.5% |
| UAE | 2-3% |
| KSA | 5-7% |
| Mexico | 1.8-2.3% |
| Columbia | 8-9.5% |
| Peru | 1-2.3% |
| U.S. | 3-6% |
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