Construction Costs Kept Rising Through July, Even As GDP Collapsed

A new research report suggests that a slumping economy hasn't been enough to prevent construction costs from rising.

In Rider Levett Bucknall's Quarterly Construction Cost Report for the third quarter, 11 of the 12 largest urban markets in the U.S. reported small increases in construction costs in July. Of the markets surveyed by RLB, only Chicago averaged lower costs this past July compared to the same month of 2019.

RLB's National Construction Cost Index, which uses costs from April 2001 as its base of 100 points (with a recalculation in April 2011), rose from 208.96 in Q2 to 209.29 in Q3. It was the smallest quarterly increase since at least 2015, but still an increase of six basis points year-over-year.

The U.S. Department of Commerce estimated that an annualized rate of $1.3 trillion worth of construction was put in place in July, a 0.1% increase over June's annualized rate and a 0.1% decrease from July of 2019.

Another report from RLB, its Crane Index, paints a slightly different picture. RLB's count of construction tower cranes across 14 cities in the U.S. and Canada found 40 fewer cranes in Q3 than the previous quarter, the first decrease of any size since July 2017. Healthcare and transportation projects increased, while projects designated as civic or cultural dropped precipitously. Not a single crane was spotted for a sports project in the markets tracked by RLB, after seven cranes in Q2.

Despite the drop in number of cranes, the construction industry seems to be more stable than the economy at large: RLB's report comes on the heels of a series of monthly reports for August that found construction jobs, starts and backlog all on the rise.

CORRECTION, OCT. 6, 8:53 P.M. ET: A revised version of Rider Levett Bucknall's report found the drop in cranes was larger than previously reported. That statistic has been updated.