Mortenson Report Bodes Well for Portland
Construction costs in Portland saw a modest rise of 0.72% during the second quarter of 2024, according to a report from Mortenson. The outlook for nonresidential construction is cautiously optimistic, with industry indicators pointing toward stronger market conditions in the near future. Although the availability of skilled labor remains a challenge in many markets, stability in material costs and supply, along with potential interest rate cuts, is increasing confidence in upcoming project launches.
Nationally, nonresidential construction costs, tracked by the Mortenson Quarterly Cost Index, rose by 1.24% in the second quarter of 2024, marking a 1.85% increase year-over-year. This followed a smaller increase of 0.34% in the first quarter. Every regional office of Mortenson reported a cost increase, including key markets like Seattle (1.08%), Denver (0.99%), Phoenix (0.76%), Chicago (0.83%), Minneapolis (2.46%), and Milwaukee (2.15%).
Over the last year, material costs have declined by 0.9%, reflecting greater stability as global supply chains have become more reliable for most construction products. In the second quarter, the largest decreases were seen in structural steel and metal decking (down 3.1%), reinforcing steel (down 3%), and floor and wall tiles (down 2.2%).
Price volatility has been primarily confined to mechanical, electrical, and plumbing (MEP) sectors, with plumbing contractors experiencing the most significant material cost increase, up 6.1% during the second quarter. Overall, trade partner work costs rose by 1.8%, construction materials by 0.2%, and labor costs by 4.2%. Labor costs have climbed by an average of 5.3% over the past year, contributing to a 3.7% year-over-year rise in trade partner costs.
In June 2024, the U.S. Bureau of Labor Statistics reported 8,100 nonresidential building construction jobs in the Portland metro area, representing a 4% decline from the previous year.
Following a 10% increase in construction starts in May, driven by major energy sector projects, the Dodge Construction Network reported a 19% decrease in starts in June, bringing the seasonally adjusted annual rate to $1 trillion. Despite this decline, single-family residential starts remain strong, indicating continued demand in the broader construction market.