Surging Construction Costs: Implications for Commercial Real Estate

In the year that followed the onset of the global COVID-19 pandemic, there was an unprecedented surge in construction costs. Nationwide, building materials rose at the fastest pace in a decade from March 2020 to September 2021 (Figure 1). Many key construction material prices climbed rapidly, in particular, lumber, metals, and plastic products (Figure 2).1

Subsequently, commercial real estate (CRE) development and renovation costs rose significantly, and many planned projects have experienced sizable budget increases and substantial delays.

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