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Mortenson: Milwaukee construction costs could rise 3% in 2021

Mortenson Construction expects the cost of projects in the Milwaukee area to rise 3% over the course of 2021 after a more modest increase last year.

That’s according to the contractor’s quarterly cost index for the fourth quarter of 2020. The report finds that nonresidential construction costs increased 2.6% in 2020 from a year before in the Milwaukee market, higher than the 2.1% increase seen nationally. Costs in Milwaukee, however, remain slightly lower than costs nationally.

And despite the COVID-19 pandemic, Mortenson finds year-over-year construction employment increased 2% overall in 2020, growth that was “driven by a continuation of activity” already underway, according to the report. Mortenson based its employment figures on Bureau of Labor Statistics data.

Mortenson recommends owners plan for a larger increase in overall construction costs in 2021. Supply-chain disruptions are continuing to drive up the price of certain materials. Reinforcing steel material, roofing systems and site utilities were each up more than 10% in the fourth quarter of 2020 from the same period the year before.

Such cost increases could drive the cost of construction up even as competition for projects heats up as contractors try to regain the sort of backlog of work that had provided many of them with a cushion in 2020.

“Downward pressure continues as some trade contractors and suppliers work to rebuild their backlogs,” according to the report. “However, due to pandemic-related disruptions to supply chains we are seeing significant increases for PVC, steel, copper, lumber and glass. This, together with losses in productivity due to ongoing COVID-19-related procedures will offset much of the downward pressure in the market.”

 

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