Construction starts in the U.S. are expected to rise approximately 10 percent in 2015, a rate almost double that estimated for 2014, according to the "Fourth Quarter 2014 USA Construction Cost Report" recently released by global construction consulting firm Rider Levett Bucknall. Activity in the commercial and residential markets, along with improved construction financing and a renewed focus on investment, are strong contributors to the projected increase, according to the report.

Rider Levett Bucknall expects the largest gains in the industry as a whole over the next 12 months to come from the commercial, institutional, industrial, and manufacturing sectors as well as from single and multifamily housing. Public infrastructure projects are expected show more modest growth.

An increase in costs and starts means it will cost firms more to meet the demands of the growing market. The firm reports that throughout 2014, a lack of available skilled labor in the U.S. has created a strain on the construction industry in some regions, particularly regions experiencing an oil boom states and in cities such as New York and Honolulu. The study concludes that a prolonged shortage of skilled construction workers—combined with rising demand for materials and equipment—will continue to fuel rising construction costs nationwide in the coming year.

Rider Levett Bucknall


The report tracks construction costs in 12 major U.S. cities. From July 1, 2014 and Oct. 1, 2014, the national average increase in construction costs was 1.66 percent, the largest quarterly gain since early 2008, according to the report. Honolulu, Los Angeles, Portland, Ore., and San Francisco experienced the highest increases in construction costs, all exceeding 2.1 percent for the period. Denver, Las Vegas, and Phoenix had the lowest gains in construction costs, all under 1.05 percent for the quarter.

In an economic boom, construction costs generally rise more rapidly than the net cost of labor and materials, which happens as profit margins increase in response to growing demand. Similarly, in an economic bust, construction cost increases dampen, or even reverse, due to a reduction in profit margins.

"While the estimated growth rate of the U.S. construction industry for 2015 is encouraging news for the nation’s economy, developers should continue to plan for cost increases even though the cost of fuel and commodities is currently under downward pressure," said Julian Anderson, president of Rider Levett Bucknall's North American business, in a press release.

Rider Levett Bucknall


For the full study, check out Rider Levett Bucknall’s “Fourth Quarter 2014 USA Construction Cost Report.”