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Rising freight prices, supply chain problems and slowed shipments from China and the US mean that the construction industry is facing serious component shortages. Many building materials, such as steel, timber, cement, insulation wool and glass, are in short supply, and material shortages are affecting the planning of future projects, and, above all, they are increasing their costs.
Building and finishing materials are increasingly difficult to obtain, and this situation is also influenced by the Covid-19 pandemic, which causes disruptions in the supply chain. According to Krzysztof Koziar, head of the construction consultancy at CBRE, the shortage of components determines currently planned investments as well as their costs, and it also affects the relationship between investors and contractors. However, it is worth noting that in the face of shortages of construction materials, many contractors decide to reuse them in situations where they do not lower the quality of the investment. Increasingly, in the case of building conversions, investors are paying attention to producing as little waste as possible, trying to use materials that had been left over from previous constructions.
Growth in the industry despite the lack of materials?
The pandemic has affected the accessibility of many building materials that were previously readily available. The shortage of composites is also associated with an increase in their prices, which is also due to the rise in freight prices. However, despite the problems with materials, the construction and assembly industry recorded an increase of 10.2% in August this year compared to August 2020.
Difficult access to raw materials translates not only into shortages of construction materials but also staffing problems and energy increases. Very acute is the shortage of steel, which is used at almost every stage of the investment, from the construction of the building structure to finishing elements and furniture. As Krzysztof Koziar emphasises, this increases investment costs and requires precise planning.
Do contractors give up on investments?
Constant changes in costs create situations in which general contractors do not submit bids, assuming that they may not complete the construction. What is more, contractors also decide to withdraw from investments, and this is because the costs of contractual penalties are often lower than the prices of materials.
The situation in the materials market may continue if further lockdowns are introduced because they will cause further difficulties in the supply chain. However, if the pandemic situation improves, a gradual stabilisation can be expected in the second half of 2022.
CBRE Group is one of the largest consulting firms that provide commercial and investment real estate services. The company appears on the Fortune 500 and S&P 500 lists and has over 100,000 employees. It also works with numerous affiliates and partners.
During last year’s, 5th edition of the PMR industry Forum: CONSTRUCTION IN POLAND 2021, according to a poll conducted among the guests of the event, the biggest challenge the industry had to face in the last year was filling the order books and the observed weakening of demand for construction services. Interestingly, only 1% of the poll participants indicated at that time that it was the rising costs of construction materials that would pose the biggest challenge for the construction industry, which is now becoming the industry’s biggest problem. This is confirmed by the results of this year’s survey, PMR data and opinions of Forum participants. Problems with rising prices of construction materials and their availability are currently the biggest barriers to construction companies’ current operations. Only slightly less severe, in the opinion of construction companies, are problems with the availability of workers, both skilled specialists and basic labor force. More: The sector at the threshold of large investments in the time of turbulence on the construction materials market. The annual industry debate “6th Forum Building Sector in Poland” is behind us!.
More information in PMR reports:
- Price forecasts for the main building materials, Q3 – Q4 2021
- Construction sector in Poland. Market analysis and development forecasts for 2021-2026 (updated each quarter)
- Construction sector in Poland – Regional analysis. Market analysis and development forecasts for 2021-2026