The Real Deal
08/13/18

LA Construction Costs Rise Above National Average: Report
By Natalie Hoberman

https://therealdeal.com/la/2018/08/13/la-construction-costs-rise-above-national-average-report

Amid a climate of mammoth wildfires and tariff boosts to key construction materials, the cost to build in Los Angeles grew 5.07 percent in the last year, surpassing the growth in other metropolitan cities like Chicago and New York.

In a second-quarter report published by Rider Levett Bucknall, a United Kingdom-based construction consultancy firm, L.A. ranked third on the list, trailing San Francisco and Portland. San Francisco logged a 6.93 percent hike year over year, while Portland’s costs grew 6.32 percent.

Nationally, construction costs rose 4.7 percent on average within the last year, according to the study. It grew 1.18 percent from January to April.

New York City, on the other hand, fell below the national average with only a 3.62 percent rise. Chicago’s costs grew 4.8 percent.

To compile its survey, Rider Levett Bucknall tracks the cost of labor and materials, as well as general contractor and subcontractor fees. It also tracks estimates of current building costs in each respective market.

Hospital building in L.A. is among the more costly endeavors, with costs reaching as high as $780 per square foot, according to the report. Luxury hotels can cost anywhere from $365 to $530 per foot, while Class A office buildings can cost up to $350 per square foot.

President Trump announced plans to place tariffs on steel and aluminum imports, causing the price for the widely used construction materials to jump. Steel suppliers increased bid prices by up to 8 percent and metal studs up to 5 percent in anticipation of the new laws, according to a CBRE report published in March.

The West Coast is likely suffering more acutely from the rising cost of lumber after a series of devastating wildfires over the past year has limited the supply. Compounding the situation, the Trump administration enacted a 20 percent tariff on Canadian lumber.

Still, higher construction costs have not deterred a number of hotel developers from taking on projects in the region. In L.A. County, the number of hotel rooms under construction increased 25 percent year-over-year through January, according to a study published last month by Atlas Hospitality Group. Statewide, there are 183 hotels with nearly 26,000 rooms under construction.