Memo: Assessing the near-term impact of the Los Angeles wildfires on the construction industry

The recent wildfires in Los Angeles have had a devastating impact on our community, destroying thousands of homes and displacing countless residents. Our hearts go out to all those affected, including many of our own team members, clients, and their families. Some of what we’ve lost is gone forever, but it is imperative that we rebuild while working to prevent a similar tragedy in the future.

In addition to supporting these vital and immediate rebuilding efforts, Cumming Group is hard at work analyzing the expected near- and long-term impacts of these wildfires on the construction industry, both regionally and nationwide. In order to quickly and efficiently rebuild the many homes, businesses, and institutions that have been lost as a result of the fires, it is important for owners and developers to understand what to expect from the market in the coming weeks and months.

Below is a brief update from our Market Insights team addressing some of the most common questions we’re hearing from clients around topics like labor and material availability. We’ll continue to monitor this evolving situation and provide updated guidance as appropriate.

Situation Overview

Wildfires have displaced tens of thousands of people, claimed dozens of lives, and destroyed more than 15,000 structures, primarily single-family homes – in a city where housing availability was already a challenge. Most of the destroyed homes are timber-framed, and Los Angeles contractors typically build around 8,000 houses each year. Reconstructing the 10,000 homes lost in the fires will likely take several years due to the sheer scale of the damage.

Economic Impact

Increased demand for materials and labor — including lumber, concrete, and skilled trades like carpentry — will drive up costs. Producers, particularly of plywood and wood framing, may raise prices, further escalating costs nationwide. On the labor side, there were approximately 253,000 trade workers in the Los Angeles area when last measured in November 2024. Up-to-date unemployment numbers for trade workers in Los Angeles are not available, but nationwide the unemployment rate among construction workers is 4.6%, and the overall Los Angeles unemployment rate is 5.4%. Given the immense amount of demand for trade workers that we expect to see in the coming months, and the relatively low unemployment rates, we expect available labor to tighten and wages to rise.

Taken together, our forecasts of the supply chain and labor pool predict a 3-5% increase in cost escalation through the first six months of 2025, prompting adjustments to internal projections from 3.6% to 6.6-8.6% annually. While the full impact of the fires is still uncertain, short-term cost increases are inevitable.

Prevention

Urban areas like Los Angeles remain uniquely vulnerable to wildfires, and recent events underscore the need for better preparation. Rebuilding efforts should anticipate stricter guidelines and building codes designed to make our infrastructure more resilient to disasters. Major planned projects, such as the 2028 Olympic Games, may need to be revisited to ensure adherence to elevated code requirements.

Cumming Group’s Market Insights team will continue to study the effects of the disaster on supply chain, labor and materials cost/availability, and broader economic impacts. Visit our Market Analysis page to access our full library of insights and to sign up to receive future updates. For immediate support, or if you’d like more information about how we can help, please reach out to us at info@cumming-group.com.