Rate of Decline in Construction Costs is Slowing

August 25, 2009

Turner Building Cost Index Projects a 2.03% Decline in The Third Quarter.

Turner Construction Company announced that the Third Quarter 2009 Turner Building Cost Index, which measures non-residential building construction costs in the United States, has decreased by 2.03% from the Second Quarter 2009. While construction costs have decreased by 10.77% since the beginning of the year, indicators show that that the decline is slowing in the Third Quarter. The Turner Building Cost Index number for Third Quarter 2009 is 820.

Karl F. Almstead, the Turner vice president responsible for the Turner Building Cost Index said, “With construction starts down in most sectors, market competition continues to drive declines in construction costs. However, global and domestic economies appear to be stabilizing.”

“Countering the cost decline, material and commodity prices have generally remained level with the exception of non-ferrous metals that have been driven up by global demand.” said Almstead.

At mid-year, mechanical and electrical equipment orders are also down and production for the balance of 2009 is expected to continue with this trend. Turner Logistics, a subsidiary of Turner, has announced that while a few products have remained at 2008 pricing levels, most have declined, with some manufacturers pricing equipment at or below cost. “Since the beginning of 2009, we anticipate a decrease of 4.5% in the cost of equipment through the third quarter of this year,” said Ben Kaplan, Vice President and General Manager of Turner Logistics. “We are also seeing lead times for equipment manufacturing to have improved by about two to four weeks. As the economy stabilizes and new equipment orders are placed, we expect to see an increase in lead time production due to reduced plant capacities,” Kaplan added.

Approximately 90% of Turner’s business is performed under contract arrangements where Turner provides extensive preconstruction planning services before the contract price is fixed and before construction starts. By providing preconstruction services and utilizing enhanced procurement strategies, Turner effectively manages the market risks associated with cost-related issues.

Turner has prepared the construction cost forecast for more than 80 years. Used widely by the construction industry and Federal and State governments, the building costs and price trends tracked by The Turner Building Cost Index may or may not reflect regional conditions in any given quarter. The Cost Index is determined by several factors considered on a nationwide basis, including labor rates and productivity, material prices and the competitive condition of the marketplace. This index does not necessarily conform to other published indices because others do not generally take all of these factors into account. Turner Logistics forecasts equipment cost through insights gained from major mechanical, electrical and plumbing manufacturers. These forecasts are validated annually through Turner Logistics Aggregated Purchasing and are published in the Turner Facilities Equipment Cost Index.

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