Real Estate Developers Navigate Volatile Material Costs with Technology Solutions

Real estate developers have been riding an unpredictable rollercoaster with fluctuating construction material costs throughout the past year. Instead of experiencing a downturn as they had hoped during the pandemic, prices for steel and lumber reached new peaks, far beyond what was seen before COVID-19 impacted the industry. In May, the price for lumber soared to $1,700 per thousand board feet while Shangh steel futures traded at an all-time high of 6,198 yuan per metric ton. These significant price hikes led to an average construction cost increase of $350 per square foot in the United States, making residential development nearly as expensive as commercial developments.

Remarkably, prices for lumber and steel have since witnessed some relief, with declines occurring in September and then agn in May. Lumber prices dropped below $1,000 per thousand board feet in June, marking a decrease of 45 from their peak in May; however, it remns substantially higher than the $400 per thousand board foot price recorded prior to the pandemic in 2019. Meanwhile, steel futures have fallen after peaking in May and are expected by Trading Economics forecasts to continue declining until the of summer at an estimated rate of 4,657 yuan per metric ton.

The erratic nature of these cost trs is hard for developers to predict, despite the recent drop. Lumber prices dipped similarly in September as well, which rses doubt about attributing this decrease solely to the waning pandemic effects on single-family home reprs and upgrades. However, even with these fluctuations, steel and lumber costs remn over 200 higher than at the of 2020.

To counterbalance rising material prices, real estate developers can leverage technology in several ways:

1. Construction Productivity Tools: Technologies like data automation andplatforms such as Northspyre help save up to 6 on construction costs by using dynamic forecasting and analytics to optimize project decisions. This could potentially offset some of the cost increase.

2. Tracking Identification Technology TIT: This includes RFID, barcodes, QR codes, and other methods that developers can use to monitor every material throughout its lifecyclefrom storage, transportation, to installation on-site. Such tracking can drastically reduce waste and minimize rework orders, which contribute significantly to project costs. IHS Markit suggests that the average rework order accounts for 2.4 of a development's budget.

3. Building Information Modeling BIM: BIM uses in three dimensions to simulate construction processes before they occur, allowing stakeholders to make informed decisions about material types, quantities, delivery schedules, and methods of construction. This technology can minimize unplanned project changes by up to 40.

By combining these productivity-driven tools with materials management technologies, developers have the potential to realize substantial cost savings even as material prices remn volatile.

To learn more about Northspyre's capabilities or explore other real estate development resources, feel free to visit our website and subscribe to our newsletter for regular updates on industry insights, trs, and events.
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