The quarterly index is a gauge that has been used for more than 50 years by the construction industry and Federal and state governments to keep tabs on building costs and price trends. The Cost Index takes into consideration labor rates and productivity, material prices and competitive conditions. "Theoretically, things cost six times as much now as they did in 1967," says Karl F. Almstead, Turner Construction Co. vice president of estimating and preconstruction services who has calculated the quarterly reports since 1997.

The Dallas-based Turner Corp. says third-quarter costs rose 1.2% from this year's second quarter and are 4.54% higher than third quarter 1999. The Cost Index for the third quarter will rise to 599, seven points above the second-quarter recording.

Metropolitan cities in Texas are not nearly as strapped as some in the northeast, particularly New York City, Almstead, who offices in New York City, told GlobeSt.com. At the crux of the nationwide escalation are rising energy prices and overwhelming commercial demands, in particular from telecommunications companies pushing for high-tech carrier hotels. Meanwhile, building continues at record levels in some regions. The key for contractors is to allow plenty of lead time for material deliveries, emphasizes Almstead. Any delays, he says, "all depend on how good the people are who are doing the project."

"General market drivers are reasonably consistent across the nation," says Almstead, but the labor cost "for specific trades in certain metropolitan areas is escalating considerably beyond the average pace." He says the variation in regional labor demands makes it relatively impossible to pinpoint which profession or metropolis may have reached the critical stage.

But, there's definitely a shortage, concurs Turner's Charlie Murphy, chief estimator in New York City, and Kyle Rooney, vice president and general manager in Texas. In New York City, electricians top the industry's most-wanted list while masons and electricians headline Texas needs, say the two Turner executives. Importing tradesmen seems to be out of the question due to the construction pace nationwide, all three Turner executives say.

Murphy says it's not uncommon to line up a subcontractor three to six months before he's needed on the job. The same holds true for materials: bricks are being ordered six to nine months before they're needed, same for drywall, structural steel and architectural glass--all key components to high-rises and just the type that now has NYC leading the northeast in construction, says Murphy.

Rooney says the North Texas labor shortage will get worse next year when ground breaks on a major project at the Dallas-Ft. Worth International Airport, an estimated $1.5 billion in projects for the Dallas and Plano Independent School Districts and the $400-million Opryland Hotel development in Grapevine. "They will devour a lot of local labor," says Rooney.

Almstead predicts the brisk building pace to continue until midyear 2001. "That's just my own personal opinion," he quickly points out. It's inevitable that building will slow down, but the question is when. "People are trying to figure that out right now. Is it two quarters away or 20 quarters away? Everything that goes up, comes down," concludes Almstead.

The Turner Corp., through Turner Construction Co. and other construction subsidiaries, is the nation's leading general builder. In 1999, the corporation completed more than $4.8 billion of construction. Founded in 1902 in New York City, the company has been issuing the quarterly pricing reports since 1913. Corporate headquarters moved to Dallas last year following an acquisition by HOCHTIEF AF, one of the world's leading construction companies.

Instant Insights /

Third-Quarter Construction Costs 1.2% Higher than Second Quarter

Related Stories

Recommended For You