Nationally, inflation last year for new construction averaged approximately 14% and in some markets rose to more than 20%, Weitz Co. Senior Vice President Larry Graeve and Chief Estimator Amy Burk wrote in an issue brief for the American Seniors Housing Association released Monday.
Hyperinflation of materials caused significant cost overruns, leading projects to be revamped or canceled altogether, according to the brief. Supply chain issues contributed to increased prices; labor challenges, exacerbated by the delta and omicron variants of COVID-19, also helped drive up prices .
“We do not anticipate this trend to repeat in 2022 due to the inflation rate on many building materials is likely to be at a lower rate than in 2021 and in some cases, at a lower cost,” the authors said.
Graeve and Burke predict that inflation will increase by approximately 6% to 8% this year, which is significantly less than 2021’s average but still higher than the normal 3% to 4%. They also expect the labor shortage to wane slightly, with labor increasing around 3% to 6%, which is up from the 2% to 4% seen in a typical year.
Supply chain issues aren’t going away any time soon, although they should improve by year-end as manufacturers get back to full production and the ports become less crowded, they wrote.
