Headwinds remain in Mortenson’s last Milwaukee construction cost index

The overall outlook for non-residential construction looks good, but high interest rates make it harder for the construction sector to find its footing, Mortenson’s Construction Cost Index for the fourth quarter of 2022 showed. Construction costs rose slightly in the nation, construction employment increased in Milwaukee and commodity prices are starting to level off.

“The overall outlook for non-residential construction remains positive, despite persistent challenges and uncertainty regarding the overall economy, as the sector works to find its footing in 2023,” Mortenson’s report said.

Construction costs showed a single quarter increase of 0.2% and a decrease of 0.8% in Milwaukee, data from the Mortenson Cost Index showed. Costs increased 6.7% nationally and 5.4% in Milwaukee over the past 12 months.

Employment in the construction sector rose 3% in the Milwaukee metro region and there were a total of 34,900 people working in Milwaukee-area construction in December, Bureau of Labor Statistics data showed. There were 1,100 more employees compared to December 2021 but labor remains a challenge for the industry, Mortenson said.

Material prices are still much higher than they were three years ago but showed signs of leveling off, Mortenson’s report said. Product lead times, material shortages and transportation logistics are still a challenge. Materials like steel, copper and PVC pipe were up compared to 2020 prices, but remained relatively stable in 2022, data showed.

“Headwinds remain, however, as higher interest rates continue to weigh on the economy and construction overall,” the report said. Available labor was short but building activity was strong, which will affect different parts of the construction labor workforce and supply chain, Mortenson added.

Denver, Seattle, Portland, Chicago and Phoenix all had increases in the last quarter of 2022, Mortenson said. Milwaukee and Minneapolis had slight decreases in the fourth quarter, 0.81% and 0.32%, respectively. Experts said customers should remain resilient as they sail further into the first quarter of 2023.

“Our construction cost index indicates that the increases experienced over the last two years are slowing,” the report said. “Based on market data and our insights, we remain cautiously optimistic while looking ahead to gauge future impacts from challenges to the national economy and construction in 2023.”