Construction activity in the Twin Cities has begun to taper off and stabilize following half a decade of steady growth.
A quarterly Construction Cost Index report released this week by Mortenson Construction shows that construction costs have grown at a normal rate while construction employment numbers have stalled.
“The market experienced a strong run-up in employment and costs over the past five years following the drop during the recession,” Clark Taylor, vice president of estimating at Mortenson, said in a statement. “We are now at a point where construction employment has stalled in Minnesota and pricing escalation should be more consistent with long-term averages.”
During the construction of several large projects such as U.S. Bank Stadium and the surrounding Downtown East developments, there was a rise in construction prices that went beyond historical averages. Without some of those huge projects, the workforce demand is stabilizing along with prices.
“Here in Minneapolis, the market is not showing as strong a result as it has in the past with several larger projects winding down,” Taylor said in a podcast.
Costs for nonresidential construction labor, material and equipment costs in the Twin Cities rose 1 percent after dipping in the first two quarters of the year. The local construction cost index is two points below the national index.
Construction unemployment in the state fell to 2.1 percent in May, its lowest level since 2001, according to estimates released last month by Associated Builders and Contractors, a national trade group. It was the third-lowest rate in the country, which had a national average of 5.2 percent.
Mortenson representatives predict that construction pricing locally will follow historic norms and increase by 3 percent into next year.
During the quarter, the price of paint-wall coverings, metal wall panels and steel framing-stairs experienced the highest cost increase compared to the same time the year before. The majority of other categories experienced flat or declining costs.
Mortenson provides industry insights for several metropolitan areas including Chicago, Denver, Minneapolis, Milwaukee, Phoenix and Seattle. Nationally, Mortenson recommended that building owners plan for a 3 to 4 percent increase over the next year.