Building in Chicago is getting more expensive more quickly than all other large cities in the nation, even after it slowed down its rate of increase considerably from last year.
Chicago-area construction costs rose 9.2 percent year-over-year in April, the largest jump among the 12 major urban centers covered in a study by Rider Levett Bucknall, Crain’s reported.
Supply chain disruptions, low interest rates, and an uptick in development, particularly for warehouses and apartments, drove up construction and labor costs as contractors were in high demand during the pandemic.
Now, the Federal Reserve’s efforts to curb inflation with interest rate hikes last year are yielding results. Chicago’s annual rate of increase has dropped from its peak of 14 percent in July 2022. Rising interest rates have made it more difficult for developers to secure financing for new projects, leading to a decrease in construction activity. So contractors and subcontractors pricing power is reduced.
“As interest rates went up, some of the escalation in our business started to mitigate,” Damian Eallonardo of Chicago-based W.E. O’Neil Construction told the outlet.
And the easing of supply chain pressures has made construction materials less scarce and more affordable, contributing to a slight decline in costs.
Eallonardo asserted the rate of construction costs increase the study found in Chicago was a little high, and that they’re up closer to 5 percent year-over-year.
Still, getting jobs these days may mean accepting lower prices than the earlier days of the health crisis. Nationwide, total construction starts fell 6 percent in the first five months of 2023 compared to the same period in 2022, the outlet reported, citing Dodge Construction Network.
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While construction costs in Chicago are rising at a slower pace, some costs of materials soared by double-digit rates year-over-year in April. The cost of cement rose 13.7 percent, and gypsum increased 12.1 percent. Conversely, lumber prices fell 32.1 percent, and steel product prices dropped 14.3 percent.
— Quinn Donoghue