No industry is immune to increased inflation, including the construction and glass industries. The glass industry saw companies increase prices and surcharges due to various economic pressures in 2022. The entire construction industry has felt the effects.

According to Steve Stouthamer, executive vice president of Skanska, one of the country’s largest general contracting firms, while 2023 could be the year where recessionary indicators dampen the double-digit annual construction inflation trend, challenges remain in local markets throughout the U.S. In fact, several cities and regions are expected to see construction costs rising above the rate of inflation over the next year.

Several U.S. cities and regions are expected to see construction costs rising above inflation over the next year.

Increased construction costs impact a wide range of trades, including glaziers. As many companies brace for a potential recession, they pause growth to cut costs. This means less need for additional space and less work for construction companies and glaziers.

In Seattle, for example, many major brands, including Microsoft, Amazon, Meta and Kaiser Permanente, have put building projects on hold. As such, contractors are under pressure to reduce fees as the competition for work increases.

Labor shortages also impact the industry. The shortages, in some cases, have forced companies to decline work and raise wages. According to Skanska’s Construction Market Trends Report, average hourly wages in December 2022 increased to $35.57 from $35.42 in November. The report added that 5% of positions in construction remain unfilled. In December 2022, construction unemployment increased by 4.4%, higher than the national rate of 3.5% for all industries.

Local Construction Costs Across the U.S.

Skanska’s report also took a close look at regional economic indicators. According to the report, which measured inflationary impacts over the next six months, the next six months to a year and the next one to two years, above-average construction price inflation will impact various cities throughout the U.S. Of the 21 major U.S. cities and regions surveyed, the majority can expect construction price inflation to be above normal (between 3% and 5% over the next two years). These cities/regions include:

  • Seattle – Several local projects have been put on hold as large companies (Microsoft, Amazon, Meta, among others) combat rising costs and changes in how people work.
  • San Francisco – National commercial lenders have named the city as their No. 1 area of concern as tech giants have halted major capital investment in construction.
  • Phoenix – The Taiwan semiconductor plant has strengthened the local market. Data center projects continue to plan for new buildings with some caution around lead times.
  • San Antonio – Economic indicators point to an upcoming recessionary period. Skanska expects construction financing to become difficult and expensive to secure. Labor shortages persist and are impacted by mega-projects throughout the Austin, Texas, area.
  • Dallas – The private commercial market in Dallas remains busy. However, signs indicate the market will level out.
  • Houston – The market continues to require a large and qualified construction workforce. A slower market is expected, but the oil and gas industry looks poised to bolster the construction industry thanks to an increased need for facilities.
  • Nashville – The demand for labor has become a leading driver of construction cost escalation in the middle Tennessee area and surrounding regions, per Skanska.
  • Orlando – Labor shortages have become a big problem in Florida. Data from Skanska shows that local unemployment had dropped below 3%, and Orlando’s private-sector employment increased by almost 65,000 in the past year.
  • North Carolina/Virginia – Developer-driven projects have been put on hold recently as demand for office space slows. The pace of new projects, an established backlog and limited labor should prevent price reductions.
  • New Jersey – Construction demand for many market sectors in New Jersey continues to increase.

The report also expects Orlando and Phoenix to experience significant/abnormal construction price inflation (greater than 5%) over the next six months to a year. New York is expected to see greater than 5% construction price inflation throughout the next six months.