Nonresidential Construction Costs Continue to Moderate as Planning Activity Shows Renewed Momentum
Key Cost Drivers
- Metal and energy-related costs remain elevated, driven by tariffs, geopolitical events, and demand for steel, copper, aluminum, and petroleum-based products.
- Large-scale data center and manufacturing investment continues to tighten regional labor markets, procurement capacity, and availability of critical materials.
- Electrical and power-distribution constraints, including long equipment lead times, continue to impact project schedules, procurement strategies, and cost certainty.
Nonresidential construction conditions remained generally stable through the first quarter of 2026, though cost escalation and procurement conditions continued to vary significantly by market and project type. While broader supply chains have improved relative to prior years, elevated metal pricing and continued demand tied to power, electrification, and data center expansion are sustaining pressure on select material categories and equipment availability.
Market activity remains uneven across regions, with strong demand in large-scale infrastructure, manufacturing, and data center construction, and softer conditions in portions of the commercial and institutional pipeline. Planning activity remains elevated across key sectors, though momentum continues to vary by asset class.
Construction Cost Index Trends
Quarterly Cost Movement
Construction input costs moved unevenly this quarter: trade partner work rose +1.8% and tracked materials were up +1.7%. Over the past year, materials (+7.0%) and trade partner work (+6.6%) all increased. While escalation persists, cost movement continues to vary by market, trade, and project type.
Nationally, nonresidential construction costs tracked by the Mortenson Quarterly Cost Index for the first quarter of 2026 rose by +1.69% over the past quarter and +6.77% over the previous twelve months. All Mortenson regional offices reported cost increases in the first quarter. Continuing a trend established across the second half of 2025, Seattle (+0.56%) and Portland (+0.86%) recorded more modest quarterly gains amid competitive bidding conditions, while other markets experienced slightly higher increases, including Minneapolis (+1.10%), Chicago (+1.53%), Phoenix (+1.97%), Milwaukee (+2.19%), Denver (+2.44%), and Salt Lake City (+3.38%).
Regional Market Activity
Construction activity across regions remained uneven in Q1, with large-scale data center and advanced manufacturing projects driving labor demand, pricing, and procurement conditions in select markets.
At the same time, several regions reported increasingly competitive bidding environments as trade partners pursued a more limited pool of conventional commercial and institutional work. While overall labor availability and supply chain conditions have largely stabilized, localized constraints persist in specialized trades and steel and electrical scopes.
Material Pricing Changes
(National Average - Cumulative Q1 2024 to Q1 2026)
In 2026, global supply chains are becoming more resilient and adaptable, helping markets better absorb disruptions. Despite improving lead times, key construction cost pressures include elevated metal prices, tariffs, energyrelated pressures, and long-lead electrical and power distribution equipment.
Transportation & Supply Chain Conditions
Entering Q2, transportation and supply chain networks remain adaptable and more resilient than in prior years, allowing markets to better absorb disruptions and pricing volatility. Trucking costs continue to trend upward due to operating cost inflation and localized capacity constraints, while ocean freight is adjusting to longer transit routes and elevated fuel costs amid ongoing geopolitical disruptions.
More broadly, tariffs and energy-related cost pressures continue to impact key materials—particularly steel, copper, aluminum, and electrical infrastructure. Lead times have improved across most materials, though long-lead electrical and power distribution components remain constrained in several markets.
Quarterly material cost increases were driven largely by metal-related scopes, tied to steel markets and tariff exposure. Key increases include metal stair fabrication (+4.5%), steel framing and stair erection (+4.1%), structural steel and metal decking (+3.8%), fire protection systems (+2.8%), and plumbing (+2.7%).
Momentum Builds Across Planning and Starts
Broader indicators show renewed momentum entering Q2 2026, with construction starts up 13% in March, driven by continued strength in nonresidential activity (Dodge Construction Network).
“A few strong categories overcame slight weakness in all the others in March,” explained Dodge Construction Network Chief Economist Eric Gaus. “The commercial segment shows the most strength with 12-month growth for all sub-categories except warehousing.”
Minneapolis Construction Employment
(Average Employment Year-Over-Year % Change)
Construction employment in Minnesota averaged 29,300 workers in the first quarter of 2026—a 3% decrease compared to the same period in 2025. Despite regional labor pressures, workforce conditions are stabilizing overall.
Source: Bureau of Labor Statistics, Minnesota - Construction of Buildings
13%
Increase in Construction Starts
Dodge Construction Network, March 2026
Construction Activity Strengthens
Construction starts are rising, with strong planning activity across key sectors, including data centers, healthcare, energy and infrastructure, indicating continued project advancement.
Design Activity Signals Growth Later in 2026
The AIA/Deltek Architectural Billings Index neared positive territory for the first time in nearly three years, signaling a potentially stronger project pipeline later in 2026.
Nonresidential Construction Outlook: Where the Market Stands in 2026
The Mortenson Construction Cost Index reflects a construction market that remains active, competitive, and increasingly shaped by project-specific conditions as the industry moves through the second quarter of 2026. While select material categories—particularly metals, electrical infrastructure, and energy-related inputs—continue to face elevated pricing pressure, broader supply chain performance and labor availability have largely stabilized compared to prior years. At the same time, competitive bidding conditions persist across many regions, even as localized pressure intensifies in markets driven by large-scale data center and infrastructure investment.
Forward-looking indicators continue to trend positively, with planning activity, construction starts, and architectural billings showing early signs of renewed momentum. Taken together, these conditions point to a construction environment where outcomes are increasingly determined by how and where projects advance. Early planning, disciplined procurement strategy, and market-specific coordination remain critical to managing risk and positioning for opportunity.
For a more specific update or questions regarding this report, please contact:
Frank Kosmach
Chief Estimator
frank.kosmach@mortenson.com
763.287.5641
Troy Blizzard
Vice President, General Manager
troy.blizzard@mortenson.com
763.287.5595
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.