Materials costs fluctuate, but construction labor costs higher

Written by Abraham Galvan on August 27, 2025

For the past year, developers have been seeing stabilization in overall material costs.

A Materials Cost Index from Engineering News-Record, citing a 20-city average, shows that the annual escalation rate is at about 0.1%. However, individual material rates can vary widely depending on several economic factors, such as tariffs, international conflict, and demand, said Johnathan Peavy, the operations manager at Robins & Morton.

“When news of tariffs breaks, we often see a sharp cost increase that takes months to normalize. Material escalation often oscillates between lower and higher averages, but what’s important to recognize is that material costs are only one of many factors affecting project estimates,” he said. “Another significant consideration for projects, specifically in Miami, is the availability and cost of labor. From competing projects to the cost of living in the Miami metro area, labor escalation is still trending higher in the South Florida market compared to the national market.”

With labor, there are fluctuations based on productivity, schedule, and more, he said.

“If you can effectively manage your labor costs, you’ll see better control in your overall budget. However, proactively managing market shifts is a standard part of working in the industry because of the many products, trade contractors, and vendors required to carry out commercial construction projects,” Mr. Peavy added. “While it’s critical for construction companies and businesses considering new projects to track market shifts, it’s equally important to remain objective, look ahead, and consult trendlines when making decisions.”

One factor contributing to the low costs of construction materials is probably that jobs aren’t getting started due to the interest rates on the development side, said Tom Thrasher, general manager of Florida East Coast operations for Suffolk.

“A lot of those jobs are kind of stalling a little bit, and now materials aren’t selling, so that’s going to drive the price down somewhat,” he said. “We also have now the tariffs that are affecting some of that cost.”

Developers and manufacturers are starting to adopt nearshoring, reshoring, and north shoring strategies to mitigate supply chain disruptions for key construction materials, Mr. Thrasher explained.

“These approaches involve moving manufacturing closer to the point of use, either domestically or to nearby countries, to reduce reliance on distant suppliers and improve supply chain resilience,” he said. “However, these efforts are still gaining traction and will take some time to fully address the disruptions.”

To improve cost prediction accuracy for future projects, technology can be leveraged in several ways, he added. Using advanced data management tools like a “clean data lake” allows companies to collect and analyze large amounts of historical and real-time cost data. This enables more accurate forecasting by identifying trends and removing variables that introduce uncertainty.

“Additionally, predictive analytics and modeling tools can help project future costs by simulating different scenarios and accounting for market fluctuations,” Mr. Thrasher said. “By integrating these technologies, project teams can provide clients with more reliable cost estimates and better manage financial risks for upcoming projects.”

Along with interest rates, the overall macroeconomic uncertainty is also a driver of reducing the pipeline of new supply, said Diego Bonet, managing partner at LD&D, a Miami-based investment, development, and design firm.

To proactively plan for potential future increases in construction costs due to possible tariffs and inflationary effects, developers should stay updated on tariff announcements, inflation data, and supply chain developments; negotiate fixed-price contracts or bulk purchase agreements with suppliers for key materials like concrete and steel to hedge against future price increases; and source materials from multiple suppliers or consider alternative materials to reduce dependency on any single source that might be heavily impacted by tariffs, Mr. Bonet advised.

“Developers should also include contingency allowances in project budgets to account for potential cost increases, as some softening or stabilization may be temporary, and where possible purchase materials in advance before anticipated price hikes take effect,” he said. “If feasible, adjust project timelines to avoid peak pricing periods or to take advantage of market softening. By implementing these strategies, you can better manage the risks associated with future increases in construction costs due to tariffs and inflationary pressures.”