Local Construction Costs up 7% in 2021

It’s no secret that construction costs are growing quickly.

The soaring price of lumber, now at an all-time high, has made national news. According to the National Association of Home Builders, the increasing price of lumber has added $24,000 to the cost of building a new home.

But it’s not the only material price that is climbing. Since the start of 2019, copper pipe costs are up 45% and PVC pipe 27% according to Mortenson Construction.

The general contractor estimated last summer that there was a chance the pandemic could reduce construction costs in Milwaukee, but the opposite has now happened.

“We recommend planning for project costs to increase 3% in 2021,” said the company in February. But through the first quarter of the year, construction costs are up 5% nationally and 7.1% in Milwaukee according to a new Mortenson report.

The general contractor produces a quarterly report that benchmarks changes back to a 2009 start date by pricing a non-residential construction project in Milwaukee and other markets. Since 2019 Milwaukee construction costs have trailed the national index, but the recent increase has pulled Milwaukee even.

“This is the largest single-quarter increase since its inception, driven by significant disruptions to the supply chain and increases in commodity costs,” said Mortenson in its latest release. The nine major material categories it tracks all saw sharp cost increases in the first quarter of 2021.

Meanwhile, construction employment is declining in Milwaukee. It dropped 11% in the first quarter of 2021 after falling 3% in the fourth quarter of 2020.

“As markets rebound with increased private and government spending, the industry may see additional upward pressure on pricing,” says the latest report.

There is the smallest of potential silver linings. “The current upward pressure is somewhat offset by a competitive market with subcontractors working to fill their capacity,” writes the general contractor.

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.

A copy of the one-page report is available on Urban Milwaukee.