United States Tender Cost Update from Mace

Mace has published its Tender Cost Update for the US market, forecasting continued growth in construction activity, although output is still below pre-recession levels.

The Mace Cost Consultancy team has found that while GDP growth slowed at the start of this year, the US economy continues its steady upward track and unemployment continues to fall. Demand for construction has increased in response to the improving economic conditions with strong growth in spending and robust design activity.

In New York the demand for residential building remains strong, while the non-residential market continues to grow. This has lead the Mace Cost Consultancy team to forecast further tightening of the labour market in the area during the rest of 2015, further increasing the cost of construction labour, with bid costs expected to continue to rise by around 4% per annum over the next two years.

Atlanta sees a similar pattern: continued economic growth and ongoing demand for new construction and a shrinking labour pool leading to upward pressure on input costs. Mace is forecasting construction costs escalating by between 2% and 3% over the next two years.

The picture in Chicago also see increasing demand for construction with tenant requirements forecast to increase over the medium term. Mace forecast cost escalation between 3% and 4% for 2015 and 2016.

In San Francisco, however, construction demand is much higher across markets. Constrained supply of housing and office space is driving up prices and with major institutional and infrastructure projects also underway, the region's construction industry is at full capacity. The Mace forecast for the region is higher here with an expectation of price escalation in the 5% to 6% range in the short and medium term.

Mace Associate Director for Cost Consultancy for North America, James Harrison, said: "Subcontractors are making up for a long period of slow growth following the global financial crisis, with steady increases in the cost of labor reflecting the demand of a busy construction market. Top tier contractors expect higher margins than the same time last year and are being more selective about what they are bidding competitively. With unemployment at a seven year low and a lack of skilled labor, prices will continue to rise into 2016."

Mace's Cost Consultancy business produces a bi-annual US Tender Cost Update, offering a snapshot of construction market conditions and movements to help businesses spot and understand trends across the industry and plan accordingly.

To read the full report, please click here.