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How Inflation Is Impacting the Construction Industry

November 4, 2021
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Anyone watching the news lately has likely seen several stories about the effects of rising inflation and supply chain issues on the economy. The majority of industries have been affected, and the impact is being felt top to bottom. From steep prices at the supermarket to volatile fluctuations in the cost of construction materials, nearly everyone is feeling the pinch of current market conditions. If you are a lender investing in construction projects, you have likely experienced these issues firsthand. This is why it can be beneficial to have an experienced construction risk management company in your corner. 

At Moran Construction Consultants, we keep clients informed with up-to-date and accurate monthly reports. Armed with this information, investors can avoid potential problems before they become costly problems. Learn more about the effects inflation and supply chain issues are creating throughout the construction industry and discover how our knowledgeable and detail-oriented construction consultants could help safeguard your investment.

Rising Costs, Flat Pricing

The cost of materials continues to rise. Even looking at the volatile movement of lumber in the past year, which saw record highs and sharp drops more recently, the value has climbed back up 40 percent from where it was in August. The demand for these materials exists. As a result, suppliers have the negotiating power to increase costs. Inputs for construction are increasing, but bid prices for construction contracts are largely staying the same or rising only slightly. Ultimately, while costs may be up by approximately 30 percent, bid prices have increased at around five percent. This, in turn, is causing many smaller contractors to go under while larger contractors who can take the financial hit remain. 

Recent Events Are Exacerbating These Issues

Several events outside of the construction industry are contributing to inflation and supply chain issues. For example, the devastation of Hurricane Ida has drastically driven demand for PVC upward. The storm itself impacted PVC manufacturing in affected areas, straining the supply. However, the demand increased due to the need for PVC replacement and repair in the storm’s wake. Similarly, you may have seen images of ships waiting to unload their cargo along the West Coast. Vendors understand the situation, and many are waiting for the highest bid before entering ports with their goods.

How a Construction Loan Monitoring Company Can Help

In uncertain times, a steady flow of information can mean the difference between lost opportunity and success. As a construction risk management company that helped clients through the cost escalation of 2004 and 2008, Moran Construction Consultants is ready to help you navigate the current market as well. 

We provide an initial document and cost review, monthly site inspections and reporting, and a final closeout report to keep our clients on top of everything happening with their investments. When issues arise, we strive to ensure clients stay informed so they can make the adjustments needed to stay on course. Call us at 225-351-2003 or contact us online to learn more about our construction loan monitoring services. Experience peace of mind knowing that your investment is protected.