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As the price of single-family homes leaves more and more prospective buyers behind, the record price of lumber is raising costs and, therefore, rental rates for new flats.
Many apartment blocks are made of metal and concrete, but wood still figures prominently in cabinets, trim, flooring, and some structural components.
The cost of building materials, in general, has risen 25 to 30 percent over the past 12 months, the largest one-year price jump since 1988, data firm CoStar reported.
The price hikes failed to slow multifamily home construction, which sprinted through 2020 at a record pace, thanks to rising rents, which climbed 4 percent during this year’s first quarter alone, CoStar said.
Meanwhile, government construction and building in commercial sectors such as storefronts and office blocks have slowed.
As a result, subcontractors are cutting their prices to win businesses, a move that helps to mitigate the relentless rise in materials costs.
At the end of 2019, subcontractors’ margins were averaging around 20 percent, David Askie, director of cost planning at Lendlease, an international construction firm, told the Wall Street Journal.
Now margins have shrunk to about 5 percent because “they want the work,” he said.
TREND FORECAST: In the commercial sector, we maintain our forecast for continuing decline as fewer people commute to work and more people shop online. Indeed, today, the Associated General Contractors reported that non-residential construction spending in April declined for the fifth-straight month to a two-year low.