North America Industrial Construction Cost Guide 2023

NEW CONSTRUCTION STARTS ACCELERATED THROUGH 2022 Value of New Construction Starts: Non-Residential Buildings, 12-Month Trailing Average

$125,000 $150,000 $175,000 $200,000 $225,000 $250,000 $275,000 $300,000 $325,000 $350,000 $375,000 $400,000 Millions USD, SAAR

Non-residential building starts declined 19.9% from February 2020 to April 2021.However, industrial starts did not decline over this period. As of September 2022, non-residential starts rose 32.7% year-over year.

Source: Dodge Data & Analytics: New Construction Starts Report

KEY TAKEAWAY • Labor constraints will continue to impact construction employment in the near-term. An increase in retirements due to an aging workforce, coupled with a lack of young workers from the overall talent pool is impacting wages and costs as well as project timelines. The introduction of skills-based programs for young workers in addition to competitive wages may help fill the talent gap in the coming years. A recent survey by The Associated General Contractors of America (AGC) found that 70% of respondent firms plan to increase headcount in 2023, however, over 80% are having difficulty filling open positions. Additionally, the AGC survey indicates that companies will increase pay (72% of respondent firms), provide incentives and bonuses and increase their corresponding payment of benefit packages to retain and attract talent.

Employment and Construction: Non-residential new construction starts accelerated in 2022. After slowing from February to April 2021, starts accelerated and peaked in September 2022 at a 32.7% increase on a YoY basis. While increased materials costs did not slow starts in 2022, the addition of accelerated interest rate increases on financing could slow the growth as costs are compounded. • U.S. construction employment grew 3.8% YoY basis in 2022 Q3. Wages in the construction sector have risen at a faster pace in order to attract talent in a labor constrained market. On a YoY basis, wages grew 11.4% in 2022 Q3. • Canadian construction employment grew nearly 6.0% YoY as of 2022 Q2, while wages grew 3.5% YoY. Wage growth have been more moderated in Canada. However, inflationary pressures may impact near-term wage growth.

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CUSHMAN & WAKEFIELD