Perspectives

US construction on the rise - but tariffs and labor drive higher costs

Mace, the international consultancy and construction company, has published its latest tender cost update for North America. The research shows that growth in the American construction market is set to continue in 2019. 

2018 saw a rapid increase in construction growth across the United States. The residential sector is a key driver of the pick-up, with low borrowing costs and ongoing wage growth continuing to support demand for additional housing. This is combined with an influx of foreign investment that is flooding major cities as a result of the uncertainty in other markets created by Brexit.

Since the last election, investment to an aged infrastructure system has been a hot topic, with airports, roadways and bridges in need of a major overhaul. A draft investment plan issued by the current administration in February lost momentum; however, now the mid-terms have concluded there will likely be a renewed focus leading into the next Presidential Election in 2020. 

Tariffs introduced on steel and aluminium combined with a shortage of available skilled labor will have a significant impact on construction pricing as the sector moves forward in 2019. 

To date, this has been tempered by contractors successfully passing costs through to clients. However with no slow down expected and prices expected to keep rising, the sector may reach a tipping point where high prices begin to impact investor confidence, potentially affecting approvals of major new construction projects. 

James Harrison, Operations Director for Mace in North America, said: 

“Material tariffs and a labor market creaking at the seams will drive an increase in 2019 prices with large contractors becoming increasingly selective both how and what they decide to bid.”