Shortages and tight supply along with frequent price increases are happening across all aspects of building and infrastructure construction. These trends have dramatically increased the cost of construction in recent months; moreover, these costs are continuing to rise at rates never seen before.
While we are not building appraisers and it is not our responsibility to determine values, as your Risk Advisor we’re here to keep you aware of issues that affect your organization’s exposure to risk. As a result of rising construction costs there is an urgent need to review the replacement cost limits on your buildings. Below find a review of changes that have occurred in common building materials within the last 12 months:
As of March 12, 2021 a basic SPF (spruce, pine, fir) two-by-four cost $1,040 per thousand board feet, while the annual average in 2019 was $372. Due to rising demand, Lumber is also in short supply. Major news outlets and experts around the country are reporting not to expect a reprieve from increase lumber costs anytime soon.
As of April 9, 2021 the price of standard plywood panels hit $1,223 per thousand, up from $1076 a week earlier and twice the price from a year ago.
The North American market is sold out. Suppliers are on allocation. There have been 3 or 4 instances in Eastern Canada where the distribution network had no inventory of 5/8” drywall to sell to suppliers.
At the beginning of the COVID-19 pandemic, the steel industry closed or reduced capacity significantly from around 87% utilization to less than 50%. As a result, pricing has doubled since November 2020 from $600-$700 per metric ton to $1,300-$1,400 per metric ton. Steel mills are advising that they will not see stability until Q1 or Q2 2022.
PERCENT CHANGE IN MATERIAL COST (APRIL 2020 - APRIL 2021)
Source: 360Value® Quarterly Cost Update, Verisk (verisk.com/360Value)
With these recent trends in dramatically rising construction costs we highly recommend that your organization hires a professional replacement cost appraiser or contractor to conduct evaluations on your assets. Contacts for professional appraisers that we know and trust can be provided.
To ensure your property assets are properly insured in case of a total or partial loss, requiring them to be replaced at current construction costs, we cannot overstate the importance to review your property values and update your policy accordingly.
In the meantime, we urge your team to set up a call with us to review your building limits in detail so we can assist in determining if any immediate action needs to be taken.
Contact your CapriCMW Advisor to arrange a meeting to discuss how rising construction costs are affecting your organization.