CHICAGO—Construction costs are on the upswing throughout much of the US, but increases in Chicago have started outpacing other metro areas, according to a study by Mortenson Construction. With supplies of some key materials, equipment and labor tightening, the Chicago-based builder and developer has raised its estimate for non-residential construction cost increases in Chicago for 2017 from 4% to 4.5%, the highest among the major markets examined. Chicago costs are up 4.9% compared to the same period a year ago.
By contrast, Mortenson says the Phoenix cost index increased 3.6% versus a year ago. This is in line with trends company officials see at the national level.
“Chicago construction activity initially lagged other markets in recovering after the 2008 recession, but it has gradually caught up and is strong now,” Dennis McGreal, chief estimator for Mortenson Construction's Chicago office, tells GlobeSt.com. Costs in the metro area jumped 4.3% in 2016.
In the second quarter alone, the Chicago index climbed 1.9%. Costs for eight building component categories, including steel framing, fire protection, earthwork and plumbing systems, grew between 2.2% to 3.5% in the second quarter, adds McGreal. Another seven categories, such as elevators, gypsum board and HVAC systems, escalated at least 1.5% during the same period.
But these increases should not cause much concern among developers. “This anticipated increase indicates a strong local market,” McGreal says. “Owners looking to build in Chicago will always take an anticipated increase into account when planning for any construction project. This may delay a project, but would likely not deter owners away from a strong local market.”
Mortenson itself has made adjustments on a major project in the region, he adds.
“For the $505 million Mercyhealth Riverside Campus that Mortenson is building in Rockford, we foresaw a potential labor and schedule challenge. The decision was made to have Mortenson prefabricate exterior metal stud wall panels at an off-site facility. This approach had the advantage of improved quality and labor control and expedited the schedule for enclosing the building.”
Mortenson tracks costs in several major metropolitan areas in the US including Chicago, Denver, Minneapolis, Milwaukee, Phoenix and Seattle. The company calculates the index every quarter by pricing representative non-residential construction projects.
CHICAGO—Construction costs are on the upswing throughout much of the US, but increases in Chicago have started outpacing other metro areas, according to a study by Mortenson Construction. With supplies of some key materials, equipment and labor tightening, the Chicago-based builder and developer has raised its estimate for non-residential construction cost increases in Chicago for 2017 from 4% to 4.5%, the highest among the major markets examined. Chicago costs are up 4.9% compared to the same period a year ago.
By contrast, Mortenson says the Phoenix cost index increased 3.6% versus a year ago. This is in line with trends company officials see at the national level.
“Chicago construction activity initially lagged other markets in recovering after the 2008 recession, but it has gradually caught up and is strong now,” Dennis McGreal, chief estimator for Mortenson Construction's Chicago office, tells GlobeSt.com. Costs in the metro area jumped 4.3% in 2016.
In the second quarter alone, the Chicago index climbed 1.9%. Costs for eight building component categories, including steel framing, fire protection, earthwork and plumbing systems, grew between 2.2% to 3.5% in the second quarter, adds McGreal. Another seven categories, such as elevators, gypsum board and HVAC systems, escalated at least 1.5% during the same period.
But these increases should not cause much concern among developers. “This anticipated increase indicates a strong local market,” McGreal says. “Owners looking to build in Chicago will always take an anticipated increase into account when planning for any construction project. This may delay a project, but would likely not deter owners away from a strong local market.”
Mortenson itself has made adjustments on a major project in the region, he adds.
“For the $505 million Mercyhealth Riverside Campus that Mortenson is building in Rockford, we foresaw a potential labor and schedule challenge. The decision was made to have Mortenson prefabricate exterior metal stud wall panels at an off-site facility. This approach had the advantage of improved quality and labor control and expedited the schedule for enclosing the building.”
Mortenson tracks costs in several major metropolitan areas in the US including Chicago, Denver, Minneapolis, Milwaukee, Phoenix and Seattle. The company calculates the index every quarter by pricing representative non-residential construction projects.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
