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White Hutchinson Leisure & Learning Group, Kansas City, MO, USA

Construction costs on the increase

Construction costs are forecast to rise 14.1% this year due to rising prices for both labor and materials, according to CBRE'S 2022 U.S. Construction Cost Trends report. Overall cost inflation for materials is expected to begin easing by the end of 2022 and largely return to typical levels by mid-2023. Labor shortages are expected to persist for the near term, increasing wage pressure. The report predicts the supply-chain disruptions should begin to ease, but long lead times and material shortages will likely continue for the short term.

The Associated Builders and Contractors association just reported that nonresidential construction input prices are 14.6% higher than a year ago and 41.1% higher since February 2020, the month before the start of the pandemic in the U.S.

Implications for LBEs

The increased cost of construction poses serious financial feasibility challenges for new location-based projects (LBEs), including family entertainment centers (FECs). Construction costs have increased far greater than the prices LBEs can charge. In addition, the recent rise in loan interest rates further complicates most new LBE projects' financial viabilitys.

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