Waiting for commercial construction costs to decrease, stressed out business man watches time pass through hourglass.

Waiting for commercial construction costs to drop?

Playing the waiting game may not be worth it. Here’s why.

What goes up must come down, right? Turns out the adage isn’t actually true all the time, including when it comes to commercial construction costs. If you’re among those trying to patiently wait out inflation and other cost increases to drive down the price tag on your commercial build, you’re not alone. But the truth is waiting for price deflation is a risky proposition for many reasons.

The complex economic factors driving commercial construction costs

What’s driving pricing in the commercial construction industry is multifactorial. The annual rate of inflation in commercial construction in a normal, stabilized global economy is generally 3% to 6%, depending on the location of your project. If you’ve followed us for any length of time, you may have seen some of our recent articles that explore the cost increases we’ve seen over the past few years exasperated by a tight labor market, supply chain issues in several supply market segments, and prolonged robust demand for commercial construction services. Global economic uncertainty and supply chain problems remind us that our globalized world trade comes with globalized complexities and fallout.

The trouble with waiting for construction costs to come down

Waiting for even one of the contributing factors to reset could take an unknown amount of time, not to mention mounting opportunity costs. While you’re waiting to build senior living, multifamily housing, industrial centers, grocery stores, healthcare facilities and more, others are seizing the opportunity to act. That gives them the lead on expanding their portfolio and getting a return on their investment, whether their new construction is in Wisconsin or Minnesota. While some are essentially coupon-cutting, others are ribbon-cutting. The question is, which approach is right for your project?

At issue is that waiting for prices to drop rarely, if ever, works. Economists know prices generally head in one direction (up!) and usually drop only when a significant regional or global event adversely impacts the economy. This holds true in construction as well as most industries. Think of a loaf of bread. It cost 25 cents in 1970, twice that ten years later, and the price continued to rise until today when you’d be hard-pressed to find a loaf for under $2, and depending on the bread, you may need to pay several times that. A family that held out on buying a home any time in recent history waiting for prices to drop hit a triple whammy today of low inventory, increased inflation, and higher interest rates. Yet renters have also encountered price increases, money that continues to evaporate while they wait for home prices to fall. The alternative is to buy high and build equity, but short-term thinking keeps many from realizing the long-term benefits of moving ahead.

The economies of construction call for the innovation of design-build

While the economics of commercial construction remain complex, there are some bright spots on the horizon with indicators that inflation is easing and pricing is stabilizing to a normal annual rate of inflation. The savvy developer knows that having the right team on board can empower them to make smart decisions that impact their bottom line. And our design-build team of professionals can help you manage construction costs so you can beat pricing pressures and inflation with creative, innovative solutions.

Early planning, strategic sourcing, and seasonal timing can help you manage your commercial construction expenses and avoid cost overruns. Our preconstruction services, specifically, give you a jump on the essential steps to completing a project on time and on budget. Contact us today to get started on your project so you can make informed, proactive progress rather than waiting for the fates to do their bidding.