Nonresidential Construction Costs Forecast to Increase with Robust Activity, Employment

MINNEAPOLIS, Minn. — Mortenson Construction recently released its quarterly Construction Cost Index report for Minneapolis – St. Paul, Minnesota, along with five other metropolitan areas in the U.S. According to the report, building owners should anticipate nonresidential construction costs to increase 3- 4 percent on average in the coming year with most markets reporting robust activity and healthy employment.

While the rate of growth in construction employment has plateaued in many of the markets tracked, nonresidential construction activity is considered healthy according to data from the Bureau of Labor Statistics. The Mortenson Construction Cost Index also tracks building component trends in 30 categories with many component prices flat to moderately up in the fourth quarter of 2015.

Highlights

• The cost index for Chicago, Illinois increased 4.6 percent throughout 2015. Building owners should anticipate cost increases of 3.5 percent – 4.0 percent in 2016.
• Denver construction employment continued to experience double-digit growth in 2015. However, the rate of growth has plateaued over the last 18 months.
• Milwaukee, Wisconsin’s construction labor market trend declined in 2015, falling 8 points year-over-year. Several building component costs increased in late 2015.
• Construction activity continues to grow in Minneapolis-St. Paul, though at a declining pace in the last year. Nonresidential growth in 2015 was flat compared to year-end 2014.
• The Phoenix, Arizona cost index is now 2.8 percent above year-end 2014. Construction employment trends point to a market that is gaining traction.
• Seattle, Washington continues with double-digit employment growth for the third year. It is recommended that building owners plan on a 3.5 percent – 4.5 percent increase for projects in 2016.

“There continues to be a lot of activity in the markets we track although average project size is reduced relative to recent years.” said Clark Taylor, vice president of estimating, Mortenson. “Construction employment is leveling out and price escalation should be more consistent with long-term averages. We believe this should allow customers to more accurately plan for increases in the next year.”

Mortenson tracks and reports on six metropolitan areas in the U.S. including Chicago, Denver, Minneapolis, Milwaukee, Phoenix and Seattle. The Mortenson Construction Cost Index is calculated quarterly by pricing representative nonresidential construction projects in various metropolitan areas. It is part of a portfolio of industry insights and market studies provided by Mortenson. The Construction Cost Index is available for download at http://www.mortenson.com/cost-index.