Colorado Real Estate Journal - March 2, 2016

Construction costs rise in Denver, per Mortenson report

Mortenson Construction recently released its quarterly Construction Cost Index report for Denver along with five other metropolitan areas in the U.S. According to the report, the record construction activity the Denver market experienced in recent years remained strong. Mortenson’s Construction Cost Index for Denver increased throughout 2015, ending the year 4.2 percent higher than the prior year. Denver’s index continued the recent trend of holding even with the national average. The report also cited that local construction employment continued to experience double-digit growth in 2015. However, the rate of growth has plateaued over the last 18 months. Costs for nonresidential construction labor, material and equipment costs in Denver were flat or dipped slightly in the last quarter of 2015. The report also noted that market construction employment trends have plateaued, but the local cost index continues to expand as the local construction market strengthens. Due to these factors along with an increase in national construction costs, Mortenson experts believe construction pricing in the Denver area will rise consistent with historic norms as the volume of construction activity levels out. Looking ahead, costs are forecast to increase 4 percent in 2016.

“Colorado’s Front Range continues to be one of the busiest construction markets in the nation, adding pressure to already tight labor markets, especially in the concrete, glazing and interior trades,” said Dan Mickelberry, chief estimator for Mortenson’s Denver Operating Group. “Understanding the current and expected future market conditions, projects should begin the planning phase of construction sooner in order to get in front of construction backlog,” he added.

In addition to Denver, Mortenson tracks and reports on Chicago, Minneapolis, Milwaukee, Phoenix and Seattle. The Mortenson Construction Cost Index is calculated quarterly by pricing representative nonresidential construction projects in various metropolitan areas.