Cost Management Report

October-December 2025 issue.
「No Signs of Improvement in Labor Supply-Demand Gap, But Construction Price Surge Shows Signs of Abating」

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This report has been prepared by the Cost Management Group of the Architectural Design Dept. of Nikken Sekkei Ltd for information purposes. While the information herein is current as of the date of publication, its completeness is not guaranteed. The contents are subject to change without notice. Unauthorized reproduction of this report is prohibited.

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No Signs of Improvement in Labor Supply-Demand Gap, But Construction Price Surge Shows Signs of Abating

Ready-mix concrete and steel see reduced demand, yet prices continue to rise and remain elevated

Both ready-mixed concrete shipments and steel orders had been declining over the past decade. However, steel prices surged after the 2020 fiscal year, gradually declining from fiscal 2022. At present, ready-mixed concrete prices continue to rise (Fig. 1). Ready-mixed concrete prices are more significantly affected by transportation and labor costs than steel prices. It is possible that they will continue to rise going forward, necessitating attention.

No signs of improvement Labor shortage persists

The construction industry employment outlook DI continues to rise (Fig. 2), surpassing the DI for the Accommodations & Food Services sector, indicating that the construction industry faces a more severe labor shortage compared to other sectors also experiencing shortages.

  • Fig.1: Trends in Ready-Mix Concrete Shipment Volume/Price and Steel Order Volume/Price Fig. 1: Trends in Ready-Mix Concrete Shipment Volume/Price and Steel Order Volume/Price
    See *1 for sources. FY2025 ready-mixed concrete shipments and steel product orders are forecasted based on actual figures from April to June/July and indexed.

  • Fig. 2: Effective job vacancy ratios for FY2014 and FY2024 Fig. 2: Employment Outlook DI Trends (Large Firms)
    Created from the Bank of Japan's Short-Term Economic Survey of Enterprises (Tankan).

FY2022 onward: the common expense rate rises

Since fiscal 2022, the common cost expense rate*2 has continued to rise, recently reaching 1.6 times that year's level (Fig. 3). This is likely due to both longer construction periods caused by overtime regulations and efforts by contractors to boost profit margins. While the impact of longer construction periods persists, contractor profitability at the time of order acceptance is improving, suggesting a likely convergence with the common expense rate.

The year-on-year NSBPI rise has peaked and begun to decline

The year-on-year increase in the NSBPI *3 peaked at 24% in Q3 2023 and has since moderated to a 10% increase (Fig. 4). The rate of increase is also slowing across different construction categories, indicating that the upward trend in construction prices is showing downward convergence. As noted in the previous issue of the Cost Management Report, there has been an increase in estimates presented at cost levels below recent market rates, necessitating careful monitoring of future developments.

  • Fig. 3: Common Expense Rate Trend *2 Fig. 3: Common Expense Rate Trend *2
    Compiled by Nikken Sekkei.

  • Fig. 4: Year-on-Year NSBPI Trend *3 Fig. 4: Year-on-Year NSBPI Trend *3

    Compiled by Nikken Sekkei.

On-Quarter NSBPI Rise Dips Under 2% in All Regions

Nikken Sekkei Standard Building Price Index NSBPI *3

While the construction rate increase remains at the previous quarter's level, upward momentum for MEP work has weakened, causing the overall work rate to decline (Figs. 5 & 6).

Building construction continues to rise in the categories of temporary work, some structural work and finishing work, but the rates of increase remains similar to the previous quarter, partly due to falling steel prices. While supply constraints remain tighter for MEP work than for building work, upward pressure from labor costs, specialized work costs and overhead rates has weakened compared to the previous quarter.

  • Fig. 5: Change in NSBPI Fig. 5: Change in NSBPI

  • Fig. 6: Percent Change in NSBPI & Building Work, MEP Work Contributions Fig. 6: Percent Change in NSBPI & Building Work, MEP Work Contributions

Divergence between Purchase Price DI and Sales Price DI narrows

After peaking in September 2022, the Purchase Price DI has since declined, remaining largely flat from December 2023. The Sales Price DI has continued to rise since September 2022, however, narrowing the gap with the Purchasing Price DI (Fig. 7). This suggests price pass-throughs are becoming more widespread. Going forward, as the upward trend in construction prices subsides, the Sales Price DI can be expected to turn downward.

Success of 8+ off days-in-4-weeks doctrine remains at just 50%

Despite the spread of efforts to secure eight off days per four-week period in response to government overtime regulations, the success rate for FY2024 is expected to remain at only 50% (Fig. 8). The impact of these rest days on project schedules is significant, and the possibility of schedule extensions persists, requiring careful attention.

  • Fig. 7: Trend in the Purchase Price and Sales Price DIs in the Construction Industry (Large Firms) Fig. 7: Trend in the Purchase Price and Sales Price DIs in the Construction Industry (Large Firms)
    Created based on the Bank of Japan's Corporate Goods Price Index.

  • Fig.8: Trend in the Proportion of 8+ Off Days-in-4-Weeks Doctrine Fig. 8: Trend in the Proportion of 8+ Off Days-in-4-Weeks Doctrine
    Compiled from the Japan Federation of Construction Contractor’s Follow-up Report on the Action Plan for Realizing Two Rest Days Per Week: Full Fiscal Year 2024.

*1: Compiled from The Japan Iron and Steel Federation's Monthly Steel Supply and Demand Statistics: Domestic Orders by Application for General Steel Products, the National Ready-Mixed Concrete Industry Association / National Ready-Mixed Concrete Cooperative Federation (ZENNAMA)'s Trends in the Concrete Industry, as well as the Economic Research Institute's Estimated Data.

*2: A ratio of common temporary construction costs and miscellaneous expenses to direct construction costs, an indicator susceptible to the effects of construction period and contractor profit margins.

*3: Nikken Sekkei Standard Building Price Index (NSBPI): An index showing price movements in construction prices, calculated independently by Nikken Sekkei Ltd. Using standard rental office space as a quantitative model, the index is calculated and converted into an index of construction prices that reflect prevailing prices, as identified through independent surveys from time to time. The first quarter (Q1) is from January to March, Q2 is from April to June, Q3 is from July to September, and Q4 is from October to December.

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