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An essential tool to guide capital expense decisions for industrial real estate
Cushman & Wakefield’s Industrial Construction Cost Guide provides an indication of the construction costs for in the industrial sector for 43 key cities in the United States, Canada and Mexico. The Guide, compiled by our Project & Development Services team, gives insight into the factors driving the industrial real estate market, and gives insight for capital planning.
While the North American industrial sector faces the challenges of rising costs, material shortages and labor shortages, demand for industrial space remains strong. The sector may face a potential cooling down in the long term, but the construction pipeline is expected to remain robust, with a focus on modern, efficient facilities that can meet the needs of a changing market.
Highlights of the report:
Economic Overview
- Strong demand for industrial properties driven by e-commerce
- Competition for materials and inflationary pressures driving construction costs higher
Commodities Pricing Update
- Supply chain constraints easing, but costs not yet at pre-pandemic levels
- Steel prices up 20% YoY, forecast to drop slightly over next couple of years
- Lumber pricing moderated, but expected to remain above pre-pandemic levels
- Copper prices have faced significant volatility, but after hitting a peak have fallen 16% on a YoY basis
- Concrete pricing at peak, expected to slow but not decrease
Building Costs Moderate
- Easing of materials pricing leads to slower increases in building costs
- ENR building cost index elevated at 11.4% in 2022 Q3, down from 15.4% previous quarter
- Forecast to ease next year and level out in the long term
- Skilled labor costs grew 3.5% YoY, highest rate in last 10 years
Construction Financing
- Increasingly difficult to finance new projects
- Could have dampening impact on longer-term pipeline
Contractor Sentiment
- GCs expect costs and supplier prices to increase slightly to significantly in next six months
- More optimistic than a year ago
Employment and Skilled Labor
- Shortage of skilled labor causing wages to increase
- Expected to continue for next few years
Strong Outlook
- Large number of projects underway or in planning stages
- Given recent occupier demand, a significant slowdown in the construction pipeline is not likely anytime soon.
- Even with new construction likely outpacing tenant demand over the next few years, vacancy rates are expected to stay near historical lows.