Denver Non-Residential Construction Outlook Remains Fluid as Costs Adjust to Market Uncertainties
The outlook for nonresidential construction for the second half of 2025 remains fluid, as evolving tariff measures and trade negotiations continue to shape market conditions. Labor costs rose in many regions in line with collective bargaining agreements, contributing roughly one point to this quarter’s index growth.
While total construction starts have shown notable gains, economic uncertainty is prompting some owners to delay projects, particularly those dependent on tariff‑sensitive sectors like steel and aluminum. This combination of delayed investment and selective market strength has created offsetting pressures on pricing. Planning activity remains supported by manufacturing and data center growth, but broader nonresidential momentum faces headwinds from fluctuating trade policies and uncertain federal funding.
Among Mortenson regional offices, Denver recorded the largest cost increase this quarter at +4.72%, reflecting heightened market activity and stronger pricing pressure. Other Mortenson offices showed varied gains, with Portland posting the smallest rise at +0.57%. The remaining markets fell between these endpoints: Phoenix +1.90%, Seattle +2.37%, Minneapolis +2.46%, Chicago +2.47%, Salt Lake City +3.24%, and Milwaukee +4.48%. Nationally, nonresidential construction costs tracked by the Mortenson Quarterly Cost Index for the second quarter of 2025 rose by +2.72% over the past quarter and +5.42% over the previous twelve months.
Tracked construction material costs continued to rise this quarter, increasing by 2.3% and contributing to a year-over-year increase of 5.3%. This growth was mostly driven by rising commodity costs, even as non-commodity material packages remained steady. Top scope package cost increases in Denver this quarter include Aluminum Entrances and Storefronts (+6.9%), HVAC Systems (+13.3%), and Plumbing Systems (+16.7%). Cost declines in Denver were again limited in Q2 but included Acoustical Ceilings (-5.0%), Gypsum Board Systems
(-3.6%), and Asphalt Paving (-3.5%). Costs for Site Concrete, Finish Carpentry, Roofing Systems, and Hardwood Flooring remained flat.
Trade partner work increased 2.9% this quarter, contributing to a +5.6% year-over-year rise. Denver (in addition to Minneapolis, Phoenix, Portland, and Salt Lake City) saw heightened trade competition driving more aggressive pricing and pressuring select scopes downward.
The Dodge Momentum Index, a leading indicator of nonresidential construction planning, rose 3.7% in May and accelerated 6.8% in June, reflecting strengthened planning pipeline momentum in both institutional and commercial sectors. At the same time, total construction starts grew 13% in May and 16% in June, with nonresidential building rebounding significantly—nonresidential starts surged 18% in May and 39% in June.
CONSTRUCTION COST INDEX
Nationally, the Mortenson Cost Index went up 2.7% in the second quarter of 2025 and is up 5.4% compared to a year ago. In Denver, costs rose 4.7% this quarter and 5.3% over the last twelve months.
CONSTRUCTION EMPLOYMENT
Building construction employment in the Denver metro region averaged 19,900 workers per month in the first six months of 2025—which is flat compared to the same period in 2024. Overall labor availability appears stable despite the market fluidity. employment.
Source: Bureau of Labor Statistics
Denver-Aurora-Centennial, CO | Construction of Buildings
MATERIAL PRICING CHANGES
Construction material costs continued to rise this quarter, influenced by the ongoing shifts in global trade dynamics. Tariff-related factors—both direct and indirect—are contributing to cost pressures, adding complexity to the broader pricing environment.
Continued from above
“Construction starts rebounded across most sectors in May and saw solid growth in June, with particular strength in manufacturing and data center construction,” said Dodge Construction Network associate director of forecasting Sarah Martin. “However, risks remain elevated that construction starts will be more subdued in the back half of the year alongside ongoing uncertainty over trade policy and the broader economy.”
Over the past twelve months, construction labor costs have risen an average of 4.9%. This quarter brought previously negotiated wage adjustments across most offices. Denver, Seattle, and Portland saw supervisory wage increases, while Chicago, Minneapolis, Milwaukee, and Seattle implemented pre-negotiated rate increases. While interest rate declines and eventual demand recovery could renew wage pressures, overall labor availability appears stable, even as long‑term nonresidential construction activity is projected to slow, with real spending expected to rise 1.4% in 2025 before contracting 1.8% in 2026.
Transportation costs are trending lower as both trucking and ocean freight markets soften. U.S. trucking prices, elevated in early 2025 due to congestion and tariff‑related demand, are expected to stabilize in the second half of the year as diesel prices fall and capacity improves. Ocean container rates have dropped roughly 50% from last year, driven by weak global demand and trade uncertainty, with seasonal pressures likely to bring only temporary tightening before broader availability resumes.
The Mortenson Construction Cost Index indicates a higher-than-normal increase in construction costs for the second quarter of 2025. While material and labor costs continue to edge higher, overall labor availability remains stable, with pre‑negotiated wage adjustments largely contributing to cost increases this quarter.
Market conditions remain fluid, shaped by evolving tariffs, selective investment delays, and heightened competition among trade partners, which is creating both upward and downward pricing pressures. Planning activity continues to be supported by growth in manufacturing and data centers, though broader nonresidential momentum faces headwinds from trade uncertainty. Mortenson is advising and working with customers to take a proactive and resilient approach to prepare for ongoing market variability in the second half of 2025.
For a more specific update or questions regarding this report, please contact:
Ruth Stabile
Chief Estimator
ruth.stabile@mortenson.com
586.634.2484
Brian Fitzpatrick
Vice President, General Manager
brian.fitzpatrick@mortenson.com
480.294.0793
Mortenson tracks and reports on eight metropolitan areas in the U.S. including Chicago, Denver, Milwaukee, Minneapolis, Phoenix, Portland, Salt Lake City and Seattle. The Mortenson Construction Cost Index is calculated quarterly by pricing representative non-residential construction projects in various metropolitan areas. It is part of a portfolio of industry insights and market studies provided by Mortenson.