Exploring the Construction Landscape: Trends, Challenges and Opportunities in 2024

By Thad Berkes

March 29, 2024

Year 2023 showed some decline on escalation throughout each quarter coming in at 6% construction escalation for end of year, compared to 8% for the previous 2022 year.

Interest rates and financing constraints are still the main talking points for 2024 as the U.S. Federal Reserve has forecasted no immediate reduction for interests’ rates this coming May adjustment. Rates will remain around 5.5% which we have seen steadily since July 2023. However, these rates have not prohibited numerous construction projects from moving forward.

It’s important to identify potential long Lead Time items at the beginning of each project and schedule accordingly. Structural steel, mechanical and electrical equipment should be evaluated at the design process of likelihood pieces that may take longer to be shipped and received to the job site.

General Contractors are still strong in the overall construction market, which allows them to pick and choose owners/developers that align with their distinct construction approach.

Construction Management (CM), Construction Manager at Risk (CMAR) or Design Build have been the three preferred methods in the last decade. Design-Bid-Build still exists but is getting more challenging to attract qualified Contractors to hard bid on projects. Construction Unemployment Rate is near 7% as of February 2024. This percentage will decline to a more normal measure of around 4% as spring and summer months typically lower the rates throughout the year and normally increase the latter part of 2024.

Overall, expect costs of construction to increase throughout the year at a 5% average escalation rate. Be sure to ask contractors on specific long lead time items and schedule appropriately.

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