The North America Quarterly Construction Cost Report for Q4 2023 from Rider Levett Bucknall, an international property and construction consultancy firm that provides project management, construction cost consulting and related advisory services, indicates a 1.32% increase in construction cost over the previous quarter. The U.S. quarterly national average increase is about 1.53% and 5.28% year-over-year.

The report, released in January 2024, covers 14 key markets in the United States and Canada. Of those, Boston, Chicago, Honolulu, Portland, Seattle and Washington, D.C. saw increases above the national average in Q4. Denver, Las Vegas, Los Angeles, New York, Phoenix and San Francisco also had gains, but below the national average.

The construction unemployment rate also went up, increasing from 3.4% over the same period last year to 3.8% this year. That equates to 450,000 job openings in the construction industry.

Despite inflation, higher lending costs and other workforce challenges, the construction industry has remained relatively resilient. In fact, construction put-in-place is up 0.6%, with an estimated seasonally adjusted annual rate of $2,027.1 billion. Infrastructure projects are driving that increase.

However, commercial construction declined 1.5% and multifamily housing is also down from previous record highs. In addition, the Architectural Billings Index (ABI) went down for the third consecutive month, dropping to 44.3 in October 2023. This indicates a decrease in architectural billings.

Interest rates and financing constraints slowed construction starts over the last quarter. Nevertheless, the Dodge Construction Network’s Dodge Momentum Index for October 2023, a monthly measure of the initial reports for nonresidential building projects in planning, saw its second consecutive month of growth due to increased commercial activity (although it remains 8% below the same period last year). Although it then decreased 1% in November, the Index again rose 3% in December.

Further, according to the report, several nonresidential projects with a budget of $100 million or more were in the planning stages in October, despite high interest rates, stricter lending standards and supply chain bottlenecks. Strong planning activity could support construction spending over the next 12–18 months.

“While there are a lot of positive indicators for the industry right now, including consumer confidence, moderating inflation, and low unemployment, there are still enough other indicators showing us that the economic uncertainty hasn’t become any clearer,” said Paul Brussow, president of Rider Levett Bucknall. “The newest numbers on the ABI, the chronic workforce challenges, and potential soft recession still feed the uncertainty and a potential slowdown for 2024.”