We have all heard the phrase “unprecedented times” more times than we'd like over the past 18 months. Unfortunately, we also have an unprecedented cost of construction due to rising costs of materials and labor. Even the high prices before the crash of 2008 are less than what we are experiencing today. To figure out why we are here, we have to look at the variety of reasons for increased costs.
About a year ago, the cost of steel skyrocketed. This wasn't because of anything COVID related but from Amazon's major expansion across the country. Building about a million square feet of warehouse space uses a lot of steel and that's about what's been needed for the distribution warehouses. According to various steel producers, Amazon is willing to pay a premium for the steel which adds to the increased cost of steel.
Similar to steel, rigid roof insulation is currently experiencing a supply shortage. We have not heard any news from the manufacturers about interrupted production or lack of raw materials. What we have heard is large roofing contractors are buying a lot of insulation to ensure their projects don’t run short. I spoke to a local roofing contractor doing the same thing, but on a smaller scale. It's very similar to the toilet paper and cleaning product shortage at the beginning of COVID.
Like steel, the price of plywood and general lumber also spiked in pricing earlier this year. However, one of the primary causes of this was a glue plant in Texas whose production was disrupted during the storms earlier this year. We are starting to see those prices come down now.
If you are planning a construction project in the next six months, be prepared for high costs. As manufacturers get their staff, prices should begin to fall. I am hopeful pricing will get back to normal in the next 6-9 months. Until then, work with your architect on how to prioritize and deal with budget overruns. Pricing might be unprecedented but we have tried and true tools to work through it.