Construction Costs Doubled in 10 Years... 70% of Construction Companies Say "Total Construction Costs Must Increase by More Than 10%"

Construction costs have doubled over the past 10 years due to rising prices, extended construction periods, and changes in regulations. In disputes between clients and construction companies arising from this, it was found that in 7 out of 10 cases, construction companies demanded an increase of more than 10% of the total construction cost.

Park Jang-sik, CEO of Turner & Townsend Korea, is presenting at the seminar titled "In the Era of Soaring Construction Costs, Are Architectural Consumers Being Protected?" held on the 25th. / Photo by Hanmi Global

Turner & Townsend Korea, a construction cost management specialist company, held a seminar on the 25th titled "In the Era of Soaring Construction Costs, Are Building Consumers Being Protected?" to discuss recent construction cost trends and the importance of managing construction costs at each stage of construction projects.

Jang-sik Park, CEO of Turner & Townsend Korea, stated, "While consumer and producer prices have risen by 1.2 times over the past 10 years, the Construction Cost Index announced by the Korea Institute of Civil Engineering and Building Technology has increased by 1.5 times," adding, "It is a reality that budgeting based on past performance is difficult."

Construction costs especially surged by 26% over three years from 2020 to 2023 due to the impact of COVID-19 and the Russia-Ukraine war. Increases in raw material prices, premium and eco-friendly factors, and regulatory changes also played a complex role.

According to Turner & Townsend Korea, prices of four major materials?rebar, ready-mixed concrete, stainless steel pipes for plumbing, and FW-CV cables?have risen by an average of 51% over the past 10 years. Labor costs for formwork carpentry surged 92% (from 143,000 KRW to 275,000 KRW) during the same period. Consequently, the construction cost for office facilities, which was around 5 million KRW per 3.3㎡ in 2014, has doubled to about 10 million KRW this year. Residential facility construction costs also increased by 94%, from 3.6 million KRW to 7 million KRW per 3.3㎡ during the same period.

Disputes in the construction industry due to soaring construction costs continue unabated. A survey conducted by Turner & Townsend Korea targeting 20 clients including developers, asset management companies, and associations found that out of 74 projects carried out in the past five years, 52 projects (70%) involved construction companies requesting an increase of more than 10% in total construction costs. There were also 18 cases (24%) where companies requested an increase of over 20%.

Hansoo Kim, a professor in the Department of Architecture at Sejong University, said, "Clients generally consider the construction cost specified in the contract as the final amount, but contractors see it as a starting point," and suggested, "There is a need for cost consultants, a professional group that can provide trust in construction costs."

Jeong-ah Lee, Managing Director at Turner & Townsend Korea, said, "For clients to take the lead in construction projects, they must establish an appropriate budget from the planning stage and understand the appropriate construction costs at each stage during the design process," adding, "To protect building consumers, project costs must be continuously managed throughout the planning, design, and construction stages."