Tuesday, March 23, 2010

Industrial Real Estate Construction Costs Continue To Decline

Below is an interesting article from Turner Construction about the continuing decline for commercial real estate construction costs. This trend will certainly help the build to suit market. Currently user are looking very hard at existing industrial properties versus build because they can purchase for less than what they can build for. In the Chicago Industrial real estate market, there have been a few build to suit deals finalized but activity in this sector of industrial real estate has dropped dramatically along with speculative development.

For more market information regarding the Chicago Industrial Real Estate Market go to:


Construction Costs Are Forecasted to Decline Further in First Quarter of 2010

Market pressures maintain downward influence on construction costs

Turner Construction Company announced that the First Quarter 2010 Turner Building Cost Index, which measures non-residential building construction costs in the United States, has decreased by 0.5% from the Fourth Quarter 2009 and decreased 7.74% from the First Quarter 2009. Construction costs have decreased by 13.06 % since their peak at the end of 2008. The Turner Building Cost Index value for First Quarter 2010 is 799.

Karl F. Almstead, the Turner vice president responsible for the Turner Building Cost Index said, “The rate of decline in construction costs is not as dramatic as it was in 2009. The reduced volume of work remains the driving force behind the market’s downward pressure on costs in the non-residential building construction sector.”

“While there are signs of recovery in the economy, the construction industry trails the broader economy due to the time required for project planning and design. As the economic recovery strengthens, increased activity in project planning will provide an indication that the rebound in the construction industry is underway,” said Almstead. Approximately 90% of Turner’s business is performed under contract arrangements where Turner provides extensive preconstruction planning services before the contract price is fixed and before construction starts. By providing preconstruction services and utilizing enhanced procurement strategies, Turner effectively manages the market risks associated with cost-related issues.

Turner has prepared the construction cost forecast for more than 80 years. Used widely by the construction industry and Federal and State governments, the building costs and price trends tracked by The Turner Building Cost Index may or may not reflect regional conditions in any given quarter. The Cost Index is determined by several factors considered on a nationwide basis, including labor rates and productivity, material prices and the competitive condition of the marketplace. This index does not necessarily conform to other published indices because others do not generally take all of these factors into account.

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