Construction costs are currently skyrocketing

2022-09-08 20:19:07

Current situation and assessment of construction price development.

I have just returned from a workshop with project developers, investors, financiers, and consulting firms. People were gathered there who develop and trade a seven-figure number of square meters (commercial) real estate each year.

Consistent tenor: Construction costs are currently already partly significantly decreasing. General contractors are again offering fixed prices without price escalation clauses. General contractors are already requesting orders for 2022, as many projects have recently fallen through and been abandoned (because they have become unprofitable). Overall, a further significant price decline is expected by mid-next year, especially due to a lack of orders and partly due to further material price reductions.

I also hear this unanimously from my clients as a banker. So everything fits together quite well.

2022-09-08 20:39:03

Current situation and assessment of construction price developments.

I just came back from a workshop with project developers, investors, financiers, and consulting firms. There were people sitting together who develop and trade a 7-figure square meter number (commercial) of real estate every year.

The consistent tenor: Construction costs are already partly decreasing significantly. General contractors are again offering fixed prices without price escalation clauses. General contractors are already asking for orders for 2022 because many projects have recently been canceled and abandoned (because they became unprofitable). Overall, a further significant price decline is expected by the middle of next year, especially due to a lack of orders and partially due to further reductions in material prices.

As a banker, I also hear this unanimously from my clients. So everything fits together quite well.

Thanks for the insights! This is the most interesting post in what feels like 200 pages. And yes, I currently feel a bit silly because over the months I skimmed through almost all posts in this thread...

2022-09-08 20:43:41

Our general contractor is also quite relaxed. However, questions remain regarding some building materials that have a high energy demand during production. It remains exciting.

2022-09-08 20:50:44

(...)
The consistent tenor: Construction costs have already partially decreased significantly. GUs are offering fixed prices again without price escalation clauses. GUs are already requesting orders for 2022, as many projects have currently fallen through and been abandoned (due to becoming unprofitable). Overall, a further significant price decline is expected by mid-next year, especially due to a lack of orders and partly due to additional material price reductions.
(...)

But this is the usual pig cycle, which works like a two-point controller. Currently, we have reached the upper point, the controller switches off, it goes down, first slowly, then increasingly steeply. Once the lower threshold is reached, the controller switches fully on again, it goes slowly up and then faster and faster.

Just a sine curve.

2022-09-08 20:59:50

Oh dear, apart from the population density Sweden has and what it could look like if it were similar to ours (see Poland figures).

What triggered me the most is the "with" or "from" Corona death. Classic example: A car crashes into a tree, person dies from internal bleeding. Did they die with or from a car accident? Would they have survived without the car accident? Would the person still have died from internal bleeding without the car accident?

I think the answer is: The person died from "XYZ" caused by Corona or the person died from internal bleeding caused by a car accident.

There is a big conceptual mistake. A large proportion of those currently counted as corona deaths do not die "caused by Corona," but with Corona as a secondary diagnosis. These people die from completely different things but happen to have Corona on the side. They would have died even without Corona.
The University of Düsseldorf publishes daily the numbers of those who are in hospital and intensive care with Corona as a secondary diagnosis. For weeks, that has been around 50%.

2022-09-08 21:08:50

There is a major conceptual error. A large proportion of those currently counted as corona deaths are not dying "caused by corona," but with corona as a secondary diagnosis. These people are dying from completely different things but happen to have corona on the side. They would have died even without corona. The University of Düsseldorf publishes daily figures of those with corona as a secondary diagnosis in the hospital and in the intensive care unit. These have been around 50% for weeks.

And do you believe that a corona infection as a secondary diagnosis has a positive effect on the "primary diagnosis" or that it might actually worsen the outcome?

Construction costs are currently skyrocketing

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