What the Data Says: Emerging Cost Increases of Interior Finishes

The cost trends and analysis of material pricing are constantly a hot topic of discussion in the construction industry and beyond – whether in response to public policy, concerns about infrastructure or the effects of the pandemic and natural disasters. As a company at the forefront of the construction industry, we welcome the conversation, and we would like to add our expertise. Through this blog series, we examine the long-term cost trends of the industry’s most vital materials. In this edition of What the Data Says, we’re examining the continued cost increases of interior finishes.

Contributing Factors for the Rise in Interior Finishes Material Costs

In our analysis of construction costs, interior finishes have shown continued increases. In the construction industry, the terms “interior finishings” or “interior finishes” are used to describe interior design components that are fixed in place or attached to other structural elements of the building, like for example to the walls, ceilings and floors. Interior finish materials shifted from declining or slow growth rates to steady rises in costs. While not the exponential increases seen in lumber, the increases represent cost escalations that are being passed into bidding proposals.

Increases in interior commercial costs match a similar industry trend seen in residential construction, as Americans quarantining at home pursued renovations and do-it-yourself projects. To further increase the demand, low interest rates elevated the market for new homes, causing home builders to boost production. This cost surge is a classic example of supply and demand. With businesses starting to ramp up operations, there is a nationwide rush for commodities such as aluminum, drywall and lumber. The high-demand nature of the pandemic recovery has emptied stressed supply chains and inflated prices at a rate we have not seen in recent years.

Our Construction Cost Database

Gordian regularly collects, validates and analyzes North American construction material costs to maintain RSMeans data, our construction costs database. RSMeans data contains more than 85,000 material, labor and equipment prices localized to 970+ locations. Thanks to the 22,000+ hours of research we devote to construction costs every year, we can examine the price of tens of thousands of line items from every corner of the U.S. and Canada.

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Tracking the Emerging Costs of Interior Materials

When analyzing the shift from declining or slow growth rates to steady rises in the costs of interior finishes, our experts looked closely at three interior finishing products in particular: interior latex paint, ceramic wall tile and nylon carpet.

The pre-COVID-19 growth rate for interior latex paint was 0.8%, rising to 9.5% due to the pandemic impact. Similarly, but even more dramatic, is the rise in costs of ceramic wall tile after COVID-19 — rising from a -8.4% decline in costs to an 8.2% increasing growth rate. Looking at the graphs, we can also see that there is volatility in these commodity prices: The costs ebb and flow, rising and falling with circumstantial impacts and the law of supply and demand.

Interior Finishes Material Costs Graphs 2021 | RSMeans data from Gordian

In our analysis of nylon carpet cost, we have seen an exponential increase in the past few months. After three years of relatively low fluctuation in costs, trending at 0.4% average growth rate, there was a 60.5% increase in nylon carpet costs.

Nylon Carpet Costs 2021 | RSMeans data from Gordian

Material Costs Rise in Aggregate But Not Universally

Here is a quick update on lumber costs as of late June 2021. The lumber costs for smaller sizes, such as 2 x 4 and 2 x 6, have dropped over the past couple weeks, but the larger varieties are plateaued at the higher rates. Also, our cost engineers have noted that the prices from the large home improvement stores are relatively the same since the beginning of the month. While the prices don’t seem to be falling as quickly as they rose, there has been a drop of 9% since June 7, 2021, in the total average lumber price.

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The rising price trends and dramatic price swings we have seen in recent quarters will have an impact on the cost of construction for the foreseeable future. This volatility in price hikes has stunned the market but while material costs are rising in aggregate, they are not universally rising. Instead, construction costs are largely driven by a few specific products and material types. We’ll continue to track these changes and more to keep you informed on what the data says.

Find out more about RSMeans data.

About Gordian

Gordian is the leader in facility and construction cost data, software and services for all phases of the building lifecycle. A pioneer of Job Order Contracting, Gordian’s solutions also include proprietary RSMeans data construction costs and Facility Intelligence Solutions. From planning to design, to procurement, construction and operations, Gordian’s solutions help clients maximize efficiency, optimize cost savings and increase building quality.