California Construction Sector Newsletter

Date: December 18, 2025 Edition: Weekly Update – Issue 1

Welcome to this custom newsletter tailored for construction company owners in California. This edition covers the latest developments from the past 7 days (December 11-18, 2025) on building permits, construction starts, material and labor costs, and other key factors influencing financial decisions. We’ve also analyzed trends from the previous 2-3 months (September-November 2025) based on available data. Information is drawn from recent reports, indices, and news to help you plan budgets, bids, and operations.

Building Permits

In the past week, several updates highlight ongoing permitting challenges and new approvals. A major explosion in Hayward on December 11 was linked to construction work hitting a gas line, underscoring safety risks in permitted projects and potential delays from investigations. In San Francisco, new building and demolition permits were filed for a nine-story apartment complex at 842 California Street, signaling continued multifamily development amid high demand. Broadband infrastructure projects face permitting hurdles from local governments, with proposals for “shot clocks” and fee caps to accelerate processes using federal funds. Additionally, Sonoma County released its latest news on December 10, noting the adoption of local amendments to building codes for wildfire-resistant construction in high-risk areas. As the 2025 California Building Code transitions to the 2026 edition effective January 1, 2026, applications submitted by December 31, 2025, will still fall under the 2022 code in many jurisdictions, offering a brief window for legacy compliance.

Financial Insight: These updates suggest potential cost savings by rushing permits before the new code, but watch for delays in high-risk or infrastructure projects, which could inflate holding costs by 10-30%.

Construction Starts

Recent starts remain mixed, with public infrastructure leading activity. On December 12, Astound launched a fixed wireless network in Northern California, part of broader broadband expansions. California’s $590 million investment in eight water projects (e.g., PFAS removal in Irvine and desalination in Antioch) broke ground recently, adding significant public sector volume. In San Francisco, a $4.3 million commercial tenant improvement project at 650 California Street started on December 11. However, overall construction spending dropped 4.7% in 2025 due to uncertainty, with only 0.4% growth projected for 2026. Data center construction is surging, creating high-paying jobs and demand for 200+ workers per site.

Financial Insight: Public projects offer stable revenue streams, but private starts (e.g., office and retail) are cautious—36% of developers delayed projects in 2025 due to tariffs. Budget for extended lead times in private sectors.

Material Costs

Material prices show signs of stabilization but face upward pressure from tariffs. In the past week, reports confirm tariffs on imports like lumber and gypsum (effective since April 2025) add ~$9,200 to single-family home costs, with similar impacts on commercial builds. The Producer Price Index for nonresidential construction rose 0.2% in September but is up 3.2% year-over-year, with further increases expected in 2026. Multifamily costs rose 4.5% year-over-year by November. Post-wildfire rebuilding in Southern California could spike steel demand. Overall, costs remain elevated but less volatile than prior years.

Financial Insight: Lock in supplier contracts early to hedge against tariff-driven hikes (20-25% on steel/aluminum). Delays could overrun budgets by up to 30%.

Labor Costs

Labor remains constrained, with shortages pushing wages higher. Recent data shows construction wages in California at $85.7 million in Q3 2025 (seasonally adjusted), up from prior quarters. Average hourly rates for trades: Electricians $47/hr in LA, Carpenters $43/hr, with San Diego slightly lower. 63% of firms expect growth in 2025, driving steady hiring despite shortages. Updates to AB 2622 raise handyman project limits to $1,000, potentially easing small-job competition but increasing wage pressure on skilled labor. OSHA violations (e.g., fall protection) remain high, with 5,914 citations in FY 2025.

Financial Insight: Factor in 3-5% wage increases for 2026 bids. Invest in training or prefabrication to mitigate shortages—data centers offer premium pay but heighten competition.

Other Relevant Information

• Innovations and Opportunities: Adoption of AI, robotics, prefabrication, and sustainable practices (e.g., super insulation for zero-energy buildings) is rising to offset costs. Sector growth projected at 6.5% in 2025, driven by infrastructure ($180B over 10 years) and clean energy.
• Risks: Economic uncertainty slows private development; monitor Fed rates for financing. Desalination projects highlight long permitting battles (e.g., 14 years for approvals vs. 3 for construction).
• Regional Notes: Orange County data shows rising construction labor costs; state-owned properties converting to 843+ housing units.

Financial Insight: Diversify into public contracts and modular tech for cost control. Median home prices at $909,400 fuel residential demand but amplify affordability pressures.

Trends from the Past 2-3 Months (September-November 2025)

Based on data through November:

• Permits: Lagged 16% below historical averages; multifamily up 1.4% MoM and 13% YoY in November. AB 130 pauses new residential code changes for stability.
• Starts: Total up 3.1% in September; single-family down 13.3% YoY through August (trend persisting). Industrial and multifamily resilient, office/retail slowed.
• Material Costs: Overall inputs up 2.3% YoY; nonresidential +2.6%. CCCI fluctuated: Sep 10238, Oct 10418 (+1.8%), Nov 10293 (-1.2%), Dec 10258 (-0.3%). Annual +3.9%. Stabilization after volatility, but tariffs loom.
• Labor Costs: Steady demand amid shortages; nonresidential PPI +3.2% YoY in September. Wages up quarterly, with Q3 at $85.7M.

Overall Trend Analysis: Costs peaked in October but dipped slightly into December, suggesting short-term relief but long-term inflation from tariffs and demand. Permits and starts show recovery in multifamily/public sectors but declines in single-family, indicating a shift toward industrial and infrastructure for stable growth. Prepare for modest 0.4-6.5% sector expansion in 2026 by focusing on efficiency tools like prefabrication.