Construction Costs Projected To Rise 3% in 2021

Construction costs and total industry employment will continue to grow in 2021.

That’s according to a new report from general contractor Mortenson Construction. The company, which has offices across the country, is one of the largest contractors operating in the Milwaukee market.

The onset of the COVID-19 pandemic didn’t cause overall prices to drop in construction costs, though it did alter the price of many components.

Non-residential construction prices in Milwaukee increased 2.6% in 2020. In mid-2020, Mortenson thought there was a possible decrease coming.

“Downward pressure [on construction prices] continues as some trade contractors and suppliers work to rebuild their backlogs,” says the company’s latest quarterly report. But that’s offset by other factors.

The contractor reports significant price increases for PVC, steel, copper, lumber and glass as a result of pandemic-induced supply chain disruptions. Productivity losses from COVID-19-related procedures are also indirectly increasing costs.

“We recommend planning for project costs to increase 3% in 2021,” says the company.

Based on Bureau of Labor Statistics data, the company is estimating that labor costs will grow in the future. Every year since 2013 Milwaukee’s construction employment base has grown. From 2013-2018 it grew between 3% to 9% annually, while 2019 saw 1% growth and 2020 saw 2% growth. The 2020 growth was attributed to projects that were already underway before the pandemic took hold.

Mortenson uses an index to compare regional costs to a national average. Starting in 2009, Milwaukee was a 97 on the index, compared to the national index of 94. But since 2016 the region has been below or even with the national index. It ended 2020 at a 135 level on the scale, compared to 138 nationally.

But while Milwaukee’s costs grew 2.6% in 2020, national costs grew only 2.1%.

The company, comparing 2020-fourth-quarter costs to third-quarter costs, reports that price increases in excess of 5% were seen in reinforcing steel materials (10.3%), site utilities (10%), roofing systems (10%) and preformed metal wall panels (5.6%). Eleven components reported price increases.

Over the same time period, decreases were seen in three components: fire protection systems (6.8%), deck formwork (5.4%) and gypsum board systems (3.5%).

The report is compiled quarterly by pricing a non-residential construction project in Milwaukee and other markets.

Mortenson has led the construction of a number of projects in the Milwaukee area in recent years, including Fiserv Forum, Diercks Hall at the Milwaukee School of Engineering and the Athletic and Human Performance Research Center at Marquette University.

In late January, the firm was announced as the general contractor for the new Milwaukee Public Museum complex, but that project is not close to a groundbreaking.

The firm is headquartered in Minneapolis, but maintains a regional office in the Honey Creek Corporate Center on Milwaukee’s west side.