What is happening to build costs?

Having recently been asked by a client the general question as to whether build costs have increased at all over the last 2 years and what the “best guess” is over the coming 12 months and 2 years it made me look at some of our experiences with both new build and refurbishment costs over the last 24 months and also to look at the industry standard BCIS index of costings.

The BCIS is the best reference source as this takes an average of tender prices across the UK and provides an average bench mark against which quarterly movements up or down can be measured.

The perception is that build costs are increasing, with reports in the media that there are shortages of some skilled tradesman and a picture of increased construction activity generally.

It is quite surprising then that BCIS reported zero price movements from January 2013 to January 2014 – the average build cost remained static over that period.  What is perhaps even more surprising is that going back to January 2013 there was a 10.7% increase in build costs over the previous 12 months, it is probable that this increase was catching up in many respects for the fall in build costs that were widely reported in the years immediately after 2007.

Projecting forward, BCIS believe that build costs will increase by 3.8% in the 12 months to January 2015 with a similar level of cost increase in 2016.  Perhaps alarmingly the BCIS indicates a significant cost increase coming through in 2017 and 2018.

Whilst it does not appear that we have any great inflationary pressure on build costs at the present time it is our advice to clients that if they are considering any construction projects over the next 2 to 3 year, that now may be a good time to commence feasibility studies and subsequent tendering or negotiating fixed price contracts for business-critical projects.  Competitive single stage tendering is always our advice for delivering best price procurement for projects expecting to come forward.

For details of any project you may be considering please contact one of the building surveying project team at Harris Lamb.