As conversations concerning lumber and other building materials continue, I want to take a moment to provide a brief update on how increased costs and supply shortages have impacted the industry overall, as well as the affects we are seeing here at Bozzuto Construction.
In terms of costs, global supply chain disruptions have resulted in an increase of nearly all natural resources, such as iron ore, steel, and copper – the latter of which has increased 47% since January of this year. As we are all aware, lumber prices have also increased significantly, rising 300% since March 2020.
Similarly, we have seen shortages in just about all materials, including lumber, semi-conductors, resin, and cardboard (to name a few), due to production cutbacks and lack of manpower. Additionally, like consumer panic-buying, companies are trying to do the same to stock up on needed materials, which has put many of our construction needs like wire, pipe, fixtures on allocations – making it nearly impossible to purchase warehouse materials.
Major Material Cost Increases
According to our in-house data and industry resources, like the Architectural Billing Index and FMI, we expect that supply-related issues and material price volatility will continue in some form through the next 12 months. Depending on the market and product type, an annual escalation of 3-5% is also expected.
That being said, I do not know anyone in our industry that has not been impacted as a result of current market conditions. Like many of our peers, Bozzuto Construction has experienced a range of project setbacks due to heightened costs and longer lead times. But we are doing whatever we can to confront the disruption head-on to help limit and lessen the severity of potential impacts. As an example, we are advising Owners to limit changes, approve materials early, and be open-minded when it comes to exploring and using alternate materials due to availability (which is a topic I discuss further in Bozzuto Construction’s upcoming eNewsletter to be distributed this summer).
The bottom line is that navigating these material cost and supply issues will remain difficult for quite some time. Fortunately, Bozzuto Construction has been successful in overcoming many obstacles thus far, thanks to our valued team members, clients, and partners. And by continuing to work closely together, we will push through, just like we have during previous challenging markets.
Bozzuto Construction Company