Denver Construction Inflation

Denver Construction

As an architect it has been great to see cranes in the sky.  Watching the structural skeletons of buildings go up is exciting.  Denver construction has increased over the last 24 months. And doesn’t appear to be slowing.  Particularly in the commercial and non-residential markets.  This results in a construction inflation.  It is advancing faster than and well ahead of consumer inflation.  This has a direct affect on contractors. More importantly it has an effect on clients and their projects.

It is important to account for the proper cost of inflation.  It also has an effect on residential projects.

When you ask the question, “What will it cost if I delay my project start by one year?” there will be consequences.  It might indefinitely postpone the project.

Denver Construction – Inflation Consequences

Here is a list of things to keep in mind as you plan for your project:

  • Long term construction cost inflation is normally double the consumer price inflation (CPI)
  • Ignoring the recession, the 20-year average inflation is 4.2%
  • During busy construction, inflation averages 8%
  • Large part of inflation is in change in contractors or suppliers margins
  • Fast increase in construction means fast margin growth

The residential construction boom lasted 6 years. During that time, cost inflation totaled 47%. The average per year inflation was around 8%.

During the last 3 year residential construction inflation has averaged 5.7%.  And it is expected that percentage will increase next year.

As you can see, delaying the start of your project can have an immediate and direct consequence.  If you are considering an addition to your existing home, building new, or purchasing and remodeling a house the time to start is now.

It takes time to produce the required documentation necessary to get a building permit.  And that time can be costly with regards to construction inflation.

I’d be interested in hearing your thoughts on this. Or your personal experience with regards to construction inflation.  Good or bad.

Leave your comment