Construction costs in Wisconsin climb while scopes of projects stay the same

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The inflation rate for construction costs is flaring higher and longer than expected, making larger projects in Wisconsin with the same scope as before the pandemic more expensive, according to a local lender.

A mix of supply chain issues, a workforce shortage and inflation brought on by the events of the pandemic created a burden for large projects, Landmark Credit Union Executive Vice President of Business Lending Adam Newman said. In turn, the loans contractors use to buy materials and equipment become more expensive as well.

Take, for example, the Wisconsin Center District board; it needed to borrow an extra $20 million to expand the convention center in downtown Milwaukee. Board members originally estimated the cost at $420 million in April 2020, but due to the rising prices of materials the cost is now $456 million. Construction firm Mortenson reported building costs in Milwaukee were up 3.9% in the second quarter of 2022.

Municipal governments outside of Milwaukee saw building budget woes as well – Wood County Board officials found bids for a county jail coming in more than $30 million more than the original estimate, despite the scope of the project not changing since March, the Wisconsin Rapids Daily Tribune reported. County officials credited a mix of workforce shortages, inflation and supply chain burdens for the expense.

“Inflation rates are rising higher than anticipated and will likely remain higher for large projects,” Newman said. Overall construction costs are 20 to 30% higher than they were in pre-pandemic days before 2019, he added.

Supply chain issues can also weigh on development time and drive costs for contractors who must pay interest on loans and developers who want to lease properties to tenants, Newman added. A missing item from concrete to HVAC units can delay the construction timeline and gouge the return on investment for either party, he said.

Newman added he hasn’t seen hesitation from contractors taking out loans despite the current pressures of the construction economy.