Construction prices in Chicago are rising faster than any other large city in the country, though their gains have slowed sharply from last year.
A study by Crain’s Rider Levett Bucknall showed that construction costs in the Chicago area rose 9.2% in April from a year earlier, the largest increase among the 12 major urban centers. report.
Disrupted supply chains, low interest rates and increased development activity, especially of warehouses and apartments, have pushed up construction and labor costs as contractors are in high demand during the pandemic.
Now, the Federal Reserve’s efforts to curb inflation by raising interest rates last year are paying off. Chicago’s annual growth rate has eased from its July 2022 peak of 14%. Rising interest rates have made it harder for developers to secure financing for new projects, leading to a drop in construction activity. Therefore, the pricing power of contractors and subcontractors is reduced.
“With interest rates going up, some of the escalation in our business is starting to ease,” Damian Eallonardo of WE O’Neil Construction in Chicago told the media.
Easing supply chain pressures have made building materials less scarce and cheaper, leading to a slight drop in costs.
Eallonardo claimed that the study found that Chicago’s construction cost increases were somewhat high, at nearly 5 percent year-over-year.
Still, finding a job today may mean accepting lower prices than it did earlier in the health crisis. The media quoted Dodge Construction Network as saying that compared with the same period in 2022, the total number of national construction starts in the first five months of 2023 will drop by 6%.
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The manufacturing and infrastructure sectors are a bright spot amid a surge in public spending, while office space has fallen out of favor with lenders.
While construction costs in Chicago have been rising at a slower pace, some material costs surged double-digits in April from a year earlier. Cement costs rose 13.7 percent and gypsum costs rose 12.1 percent. In contrast, lumber prices fell 32.1 percent and steel prices fell 14.3 percent.
— Quinn Donoghue
