LA Construction Costs Up 5.9%, Adding Challenges to Fire Rebuilding

Soaring construction costs in Los Angeles are proving to be another major hurdle in rebuilding efforts following recent wildfire damage.

According to data from Verisk, which tracks construction cost indexes across 34 regions statewide, Los Angeles saw a significant 5.9% increase in construction costs for the 12 months ending in the fourth quarter of 2024. This was the highest rise in costs among all California regions.

These cost increases come ahead of the construction demands expected from the January firestorm, which destroyed or damaged more than 12,000 structures in areas like Altadena and Pacific Palisades. Additionally, uncertainty surrounding the potential impact of trade wars on building supply prices remains an ongoing concern.

As of 2024, Los Angeles experienced a 5.9% increase in construction costs, marking a 44% rise over the last five years. This surge is the fourth-largest in the state. While the situation is concerning, there is some relief as construction inflation in L.A. has slowed significantly compared to the 12.4% per year pace seen in early 2022.

Statewide Construction Cost Trends

‍Construction costs have risen across California since the pandemic, with various factors driving up expenses. The need to catch up from coronavirus-related disruptions and ongoing supply chain challenges have significantly inflated the cost of construction materials.

Statewide, construction costs rose by 3.2% in 2024, contributing to a 39% increase since 2019. Notably, the state saw the highest rate of inflation during the first quarter of 2022, which peaked at 12.5% annually.

In Southern California, the median rate of construction inflation was 2.9% in 2024, with a 39% rise over the last five years. Regional markets in the area saw varying degrees of inflation, with some areas seeing peaks of over 13% during the first quarter of 2022.

Key Drivers of Rising Costs

‍The primary culprits behind these cost hikes include labor shortages and difficulties in sourcing materials. According to federal construction-wage indexes, labor costs in California have risen by 4% annually and 21% since 2019. While the cost of construction goods decreased by 1% over the past year, they remain 40% more expensive than they were five years ago.

Regional Breakdown

‍Here’s a look at construction inflation across other Southern California markets:

• Palm Springs: Increased by 3.7% last year (No. 5 in the state), with a 39% rise over five years (No. 20). The peak was a 13.2% rise in the first quarter of 2022.
• South Bay: Saw a 3.7% increase last year (No. 6), with a 35% rise over five years (No. 32). The peak was 8.9% in the first quarter of 2022.
• San Fernando: Experienced a 3.3% rise last year (No. 11), with a 42% increase over five years (No. 10). The peak was 13% in the first quarter of 2022.
• San Diego: A 3% rise last year (No. 17), with a 44% increase over five years (No. 7). The peak was 18.9% in the first quarter of 2022.
• Simi Valley: Rose by 3% last year (No. 18), with a 40% increase over five years (No. 17). The peak was 12.8% in the first quarter of 2022.
• Santa Barbara: Experienced a 2.9% rise last year (No. 20), with a 36% increase over five years (No. 29). The peak was 11.6% in the fourth quarter of 2021.
• Orange: Saw a 2.9% rise last year (No. 21), with a 44% increase over five years (No. 5). The peak was 15% in the first quarter of 2022.
• San Bernardino: Increased by 2.7% last year (No. 26), with a 38% rise over five years (No. 22). The peak was 13.3% in the first quarter of 2022.
• Victorville: Had a 2.6% increase last year (No. 29), with a 40% rise over five years (No. 15). The peak was 13.3% in the first quarter of 2022.
• Lancaster: Experienced a 2.6% increase last year (No. 30), with a 37% rise over five years (No. 28). The peak was 11.8% in the fourth quarter of 2021.
• Ventura: Saw a 2.5% rise last year (No. 31), with a 42% increase over five years (No. 9). The peak was 14.9% in the first quarter of 2022.

Looking Ahead

‍The persistent rise in construction costs, particularly in Los Angeles and Southern California, continues to pose challenges for rebuilding efforts, especially in fire-damaged areas. As these costs continue to climb, the future of construction in the region depends on overcoming labor shortages, sourcing materials efficiently, and dealing with external economic factors.

Originally reported by Jonathan Lansner in Los Angels Daily News.