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Economic Analysis

Construction Industry Market Updates March 2022

March 11, 2022

Since VERTEX’s Q1 2022 update, the Construction Industry continues to experience strong spending and increasing employment, albeit with increasing construction material costs. The 30-year Fixed Mortgage rates are slowly beginning to inch up.

But Russia’s invasion of Ukraine late February threw a major curveball in international trade. As commercial and consumer markets respond to drastic changes around the globe, the effects are visibly apparent in key operations throughout the AEC Industry.

These changes are affecting lead times for major building system equipment orders: they are substantially longer than usual trends in the industry.

Constant changes in pricing and materials escalation are also direct reflections of the current state markets are in and their direct effects on the AEC industry.

Current HVAC Equipment Lead Time Projections

Based on market research and conditions the leads times of HVAC equipment will continue to increase at a steady rate. Additionally, any equipment with an ECM motor will most likely be substantially affected by these increases.

VERTEX has compiled the following projections based on recent activities and inquiries throughout its projects and daily operations as of March 2022:

EquipmentLead Time – March 2022Notable Increases since Jan ‘22
Air Cooled Chillers20-40 weeks (~ 9 months)Increased from 16-28 weeks
Modular Chillers18-30 weeks (~7 months) 
Water Cooled Chillers20-36 weeks (~8.5 months) 
Custom AHU (1)20-60 weeksIncreased from 20-55 weeks
Modular Catalogue AHU18-26 weeks (~6 months) 
Control Submittals6 weeks 
Cooling Towers16-28 weeks (~6.5 months)Increased from 22-26 weeks
Packaged RTU Large14-35 weeks (~8 months) 
Packaged RTU Small14-17 weeks (~4 months) 
Fan Coil / Blower Coil8-16 weeks (~3.5 months) 
Chilled Beams12-22 weeks (~5 months) 
Packaged ERU16-20 weeks (~4.5 months) 
Boilers12-20 weeks 
Pumps8-18 weeks 
Pumps – Large Split-Case18-24 weeks (~5.5 months) 
Heat Exchangers10-16 weeks (~3.5 months)Increased from 8-14 weeks
Computer Room Units (CRAC)20-70 weeks (~18 months)Increase from 17-34 weeks
Mitsubishi VRF Units6-34 weeks (~8 months)Increase from 6-12 weeks
Mitsubishi ERV Units16-20 weeks 
VAV Boxes8-10 weeks 
General Fans10-12 weeks 
Lab Fans14-25 weeks 
Registers/Diffusers8 weeks 

(1) For Custom Air Handling Units, it varies from manufacturers. We are seeing quoted lead-times slipping. Also it is exceedingly difficult to estimate until purchase order is issued, and in MOST cases, not until approved submittals are released for fabrication. This is very volatile.

Current Pricing Impacts On Equipment

Along with the change in lead times, all equipment has been changing constantly. The big thing to keep in mind right now is Purchase Orders (POs) Don’t Secure pricing. RELEASE OF APPROVED SUBMITTALS ARE WHAT WILL SECURE PRICING.

Some major equipment players are requiring up-front payments and/or interval payments (i.e., 25% down, 25% & 50%).

Current Material Issues

The Russian invasion of Ukraine and subsequent international sanctions is affecting the availability of construction materials. Both countries are major producers of iron ore (Ukraine #7 and Russia #5), as well as Aluminum, Alumina (Al2O3) and other materials.

Coil Stock is undergoing a unique quoting procedure from suppliers called “PIE” – “Price in effect,” which is affecting its supply line as well as purchasing capabilities.

Galvanized Stock has come down at this point in time. However, the continued escalation with the conflict occurring in Ukraine has resulted in additional issues throughout the supply chain that will be directly affected in the near future. Galvanized Sheet Metal is currently priced at $1.30/# -This is expected to be temporary, and supplies are limited.

304 Stainless Steel Sheet Metal is currently at an unstable pricing of $5.80/# as well as 316 Stainless steel sheet metal which is currently $5.95/#.

Aluminum has shown high volatility and is currently priced at $4.00/#. This is a drastic change from May 2021, when it was priced at $2.66, and its previous high of $1.95 before then.

Piping Materials currently remain up over 25-30% and will be an area of close surveillance in the next few quarters.

Additional lead times have been quoted recently for the following materials:

  • Galvanized sheet metal coils = 8 weeks (about 2 months).
    • Pro-Press & Victaulic have increased. Some ability to mitigate the risks due to advance release “pack-and-hold” strategies that were conducted.
    • Valves = 12-14 weeks (about 3 months).

There have been no current issues reported regarding Insulation.

Labor Updates in Boston

Pipe Labor (local 537) has reported that over 280 travelers are currently in the Boston area, and this is expected to continually grow.

Sheet Metal Labor (local 17) has reported approximately 90 travelers are currently in the Boston area.

Future Projections of Construction Cost

Experts still project the tight supply of raw materials to continue through 2022. The magnesium shortage is greatly disrupting the aluminum markets. Long leads on equipment with aluminum are also expected due to the ongoing conflict in Ukraine.  Additional projections of increased lead times for manufactured goods are expected in light of the conflict abroad, specifically HVAC Equipment.

With the unemployment working towards pre-pandemic levels and construction employment almost back to its highs, we expect continued upwards pressure of wages.

To learn more about VERTEX’s Construction Consulting services or to speak with a Construction Expert, call 888.298.5162 or submit an inquiry.

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