North America Industrial Construction Cost Guide 2023

C U S H M A N & WA K E F I E L D

KEY TAKEAWAY • Steel prices remain elevated at a 20% increase year-over year (YoY). Prices are forecast to drop slightly and level out over the next couple of years. • After reaching peak levels in 2021 Q2, lumber pricing has moderated, registering a 6% increase YoY. Pricing is forecast to level out but remain above pre-pandemic levels for the next few years. • Copper prices have faced significant volatility, but after hitting a peak at the beginning of this year, 2022 Q1, they have fallen 16% on a YoY basis. A modest drop in prices is forecast for 2023.

ECONOMIC OVERVIEW Strong demand for industrial properties, fueled in great part by the rise in e-commerce, has led to historic levels of construction in the sector. Competition for materials in a commodity constrained market, coupled with inflationary pressures, has driven construction costs higher across all real estate sectors. Commodities Pricing Update: Pandemic related supply chain constraints, which led to elevated commodities pricing, have begun to ease. Bottlenecks of container ships at ports are no longer the norm. According to FreightWaves, North American container ship traffic on November 23rd was down 60% from recent highs. Only 59 container ships were waiting for a berth. However, this was still above pre-pandemic levels, which were typically in single digits. The easing of traffic at ports may signal forthcoming easing of materials availability. That said, due to continued pent up demand, costs have not fallen to pre-pandemic levels. Concrete pricing has increased 14% from Q3 2021 and is currently at its peak pricing and YoY growth. Though pricing is unlikely to fall, the rate of growth will slow to more moderate levels in the next couple years.

​COMMODITY PRICE INCREASES MODERATING​ Cost Index for Lumber, Steel and Copper​

Forecast

Lumber

Steel (Pipe and Tube)

Copper

800

700

-16% decrease YOY

20% increase YOY

600

500

400

300

Cost Index

6% increase YOY

200

100

0

Source: U.S. Bureau of Labor Statistics (BLS); Moody’s Analytics Forecasted​

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CUSHMAN & WAKEFIELD