Development

Charlotte construction costs rise faster than comparable markets

Uptown construction brings new landscape: 615 South College and Stonewall Street station.
Uptown construction brings new landscape: 615 South College and Stonewall Street station. ogaines@charlotteobserver.com

Charlotte saw a bigger jump in construction costs last year than in some comparable markets, according to a report from Messer Construction Co.

The report showed Charlotte construction costs up 4.2 percent last year. That compares to other markets Messer operates where costs were down, such as Cincinnati (minus 1.31 percent), Indiannapolis (minus 0.52 percent) and Nashville (minus 1.15 percent).

Steve Keckeis, who leads Messer’s Charlotte office, said much of the increase is due to a particularly tight labor market in Charlotte.

“I think the biggest drivers of that are the labor and the busy market,” said Keckeis. “Everybody’s experiencing some of it, but I think Charlotte’s experiencing more.”

At development-related forums I’ve been to in recent weeks, developers and builders have spoke of the difficulty of finding qualified subcontractors and skilled workers, and the extra delays that can add to schedules. Keckeis said he’s seeing the effects in his hiring.

“I’m continuing to hire both craft side and administrative workers,” said Keckeis. “We’ve noticed the wages we’re paying to get the people are up.”

Still, the number of people working in construction in North Carolina is 24 percent lower than it was in 2006, according to the Messer report and statistics from the Bureau of Labor Statistics.

“There is a consensus among construction employers that the ‘missing’ employees left the construction industry during the recession and are not returning,” Messer wrote in its report. “The struggles that the construction industry has with attracting new, younger employees to replace the employees that have left is well documented.”

And that could keep construction costs moving up this year even if the prices of some key materials continue to fall. For example, hot-rolled steel prices fell 20 percent last year, driven largely by a slump in Chinese construction. And diesel gasoline is down 43.6 percent as the oil markets continue falling.

Other materials rose in cost, but remain lower than they might be if the recession and real estate crash hadn’t socked the market. For example, cement was up 9 percent in 2015, but average prices are still only 7 percent higher than they were in 2007, at the peak of the boom.

Keckeis said seeing construction costs increase isn’t all bad news – it means there’s lots of building here.

“We’ve been in a depressed economy,” said Keckeis. “It is a good thing. We’re seeing a lot of growth here.”

Ely Portillo: 704-358-5041, @ESPortillo

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