3.14.22

MAKING DATA-BASED DECISIONS IN A VOLATILE MARKET

Market volatility, supply shortages, and inflation are themes in the news these days. While “the struggle is real,” it can be managed with a team that navigates uncertainty with knowledge.

In 2021, the one constant with construction cost was change. Materials pricing saw fluctuations throughout the year, resulting in a 12% construction cost increase from the previous year.

The volatility of different materials markets can impact the details of your construction project. While cost volatility is high for plastic pipe and pre-fabricated steel right now, materials such as copper and ready-mix concrete are showing low volatility. Metals and plastics increased moderately through the 4th quarter, but at a slower rate than during the previous two quarters.

There’s no guarantee the market will return to the former baseline, and interest rates are rising. Higher interest rates would offset savings if market volatility does subside. So “waiting it out” might not pay off.

If you’re thinking about building and are uncertain about the current market, there are ways to move toward the decision that is best for you.

Hutton project estimator Brett Budd explained that the best way clients can protect themselves is to choose a team that is actively looking at market prices.

“It’s extremely helpful to know what the markets are doing and how that can impact design and construction decisions, such as recommendations for a specific structure type,” said Budd. “We urge our clients to choose a partner who keeps a regular eye on the market.”

We’re working with our clients on early procurement plans for materials and locking in pricing sooner to manage costs. In the steel market, for example, Budd noted that he is currently tracking a 100% increase year-over-year for the steel materials used for building a structure.

“Inflation is something no one has control over, but an internal contingency will help account for that and provide some protection from it,” said Budd. “If you haven’t been asked about an anticipated start date, you’re probably making a decision based on information that’s already inaccurate.”

Hutton’s market data reports

In a fluctuating market, it’s critical to have the most current information for any estimate or bid. We monitor market trends, which allows us to have those conversations with clients in real time. Last year, we began producing a quarterly market data report for clients so they could benefit from the market pricing we were already tracking.

This report breaks down cost changes and volatility levels for the most common materials. We track the average percentage change per year over the past four years and break out the quarterly percentage change from previous quarters.

“Current and potential clients appreciate these reports because they can easily see what the market is doing and consider alternatives based on their risk tolerance,” said Hutton education market leader Brandon Brungardt.

Our 2021 Q4 market data report is now available for download. If you’re interested in seeing how these trends will impact your next construction project, fill out the form below to get started.