Inflationary Pressure Continues for Non-Residential Construction as Costs Reach New Highs
Input prices increase as expected while some early signs may signal changes ahead
Mortenson, a leading national builder and developer, today released its Q2 2022 Construction Cost Index report for Minneapolis and other major U.S. markets. The overall construction cost index across all markets tracked increased as expected, reaching a new high. According to data from the second quarter, which ended on June 30, nonresidential construction costs increased by +3.3% on average, which represents a +11.8% increase over the previous twelve months.
The following quarterly average price changes were observed in the seven markets that Mortenson tracks: Chicago (4.0%); Denver (2.2%); Milwaukee (3.9%); Minneapolis (3.3%); Phoenix (2.55%); Portland (3.6%); and Seattle (2.9%).
According to the report, product lead times, fuel price increases, and labor costs and availability continue to challenge suppliers, contractors, and projects. Early economic signs have emerged, however, that may signal changes ahead although it’s premature to draw conclusions. The recent Bureau of Labor Statistics Producer Price Index report indicated a softening of input prices in a few categories while many still advanced. Upcoming U.S. economic data for Q3 may indicate if any broader trends are beginning to emerge.
“The construction market, as with many, continued to experience inflationary headwinds through the first half of the year,” said Clark Taylor, vice president of estimating at Mortenson. “The current talk of an economic downturn, higher interest rates, and a slowly-recovering supply chain may work in the industry’s favor at some point but right now we see regional averages trending higher consistent with forecasts.”
Based on market data, observations and insights, Mortenson sees much of the same moving forward in the second half of the year including ongoing workforce challenges, increases in material shipping costs, and product lead times and material shortages remaining a challenge.
Mortenson tracks and reports on seven metropolitan areas in the U.S. including Chicago, Denver, Milwaukee, Minneapolis, Phoenix, Portland, and Seattle. The Mortenson Construction Cost Index is calculated quarterly by pricing representative non-residential construction projects in various metropolitan areas. It is part of a portfolio of industry insights and market studies provided by Mortenson.
For nationwide construction cost index data visit: Mortenson.com/Cost-Index.
Download the Q2 2022 Construction Cost Index report for your region: