Life Sciences U.S. Fit-Out Cost Guide 2025

CONSTRUCTION COST INCREASES HAVE NORMALIZED BELOW 4%

The pace of construction cost increases continued to decelerate through 2024.

2024. Skilled labor costs have eased even more significantly, rising just 1% YOY in September 2024, a marked deceleration from the 3.5% YOY increase of September 2023. Wages in the construction sector continue to grow faster than overall employment wage growth. Based on data from the Federal Reserve Bank of Atlanta, construction and mining wages grew 5.8% in August 2024, faster than the overall employment wage growth of 5%, which remains well above the Fed’s goal of approximately 3.5%. While August wage growth is strong, it has receded slightly from the 6.1% growth rate in August 2023. This minor deceleration has contributed to a slight easing of costs. However, the average hourly earnings for construction workers are $35.83, which is 18% higher than private sector hourly earnings, illustrating the higher labor costs impacting the construction sector.

Although costs are increasing at a slower rate, their inflationary impact means they remain significantly higher than in January 2020. Based on the Engineering News Record (ENR) index, construction costs, which include common labor, rose 1% YOY as of September 2024, less than half of the 2.4% increase from September 2023. Building costs, which include skilled labor, were also lower in September 2024 at 1.7% YOY, down from the 3.6% YOY increase of September 2023. Labor costs continue to impact overall construction costs as wage increases persist. However, the ENR index points to some easing for both common and skilled labor in 2024. Common labor costs increased 1.8% YOY in September 2024, in line with the same YOY increase from September 2023 but below the 3.2% YOY increase from February and March

CONSTRUCTION COST INDEX

MONTHLY YOY CHANGES

10% 12% 14% 16% 18%

25,000

20,000

15,000

0% 2% 4% 6% 8%

10,000

5,000

ENR: Cost index, (1913=100, NSA)

Jan-17

Jan-21

Jan-12

Jan-15

Jan-13

Jan-18

Jan-16

Jan-19

Jan-14

Jan-21

Sep-21

Jan-22

Jan-23

Jan-24

Jan-22

Jan-23

Jan-20

May-21

Jan-24

Jan-20

Sep-22

Sep-23

Sep-24

Sep-20

May-22

May-23

May-24

May-20

Construction Building Common Labor Skilled Labor

Construction Building Common Labor Skilled Labor

Source: Engineering News Record (ENR) (McGraw-Hill)

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Cushman & Wakefield