03/29/2023
With unprecedented, generational inflation, the Telluride region, like the rest of the world, has seen construction costs increase dramatically over the past few years. We continue to monitor both regional and national cost trends for both labor, materials and commodities. We found this article provides good insight on the direction of construction material costs both nationally and internationally. Despite the impact of higher interest rates on national construction starts, we are still seeing significant inflationary pressures nationally as well as regionally. Copper, drywall, concrete and engineered lumber all continue to see increases, although not nearly at the extreme pace of 2021-2022. While some steel prices have come down, other products such as Hot Rolled Steel and extruded steel like HSS columns are continuing to increase. Energy and transportation infrastructure (trucking) remain a big issue that is exacerbated by Telluride's remote location resulting in very high transportation costs. It will be interesting to see how these costs track as we get into the busier spring and summer construction seasons.
Given what continues to feel like "unprecedented" times we are living through, it is virtually impossible to predict where pricing will head over the next 18 months. In the span of a week, we went from a "soft landing" to a potential banking crisis and have simply stopped trying to make predictions on where we are heading. Instead, we are focused on staying highly organized and proactive with material procurement. We work with multiple, high quality vendors and are leveraging our track record and current portfolio to make sure we are getting the most competitive pricing and avoiding shortages or delays by placing orders well ahead of when we will need the materials. Even with our approach, we have still had surprises along the way with supply chain issues as well as scenarios where the material is available but we have to wait on trucking due to driver shortages.
Telluride has always been one of the most challenging areas in the country to build in and the last few years have seen it get even harder but with careful and clear planning, we continue to excel at providing phenomenal projects in our home town. After all, if it was easy to operate in Telluride, it wouldn't be nearly so special!
The report cautions that inflation, a possible economic downturn and China’s stance on COVID protocols will keep prices high throughout the year. In 2023, the construction industry is expected to shrink by 7 percent.
