Construction Cost Index: 3rd Quarter 2026

Non-residential Construction Costs Remain Steady as Labor and Material Pressures Persist

Nonresidential construction conditions remained broadly stable through the first half of 2026, though cost pressures varied significantly by market, trade and project type. Mega-project investments remain the strongest source of upward pressure, while softer demand across portions of the commercial and institutional market continues to create competitive bidding opportunities as trade partners actively pursue available work. 

Quarterly Construction Cost Movement

Nationally, nonresidential construction costs tracked by the Mortenson Construction Cost Index increased +1.58% during the quarter and +5.60% over the past twelve months. Quarterly increases ranged from +0.60% in Milwaukee to +2.86% in Minneapolis, reflecting differences in scheduled labor-rate adjustments, regional project activity, competition, and mega-project demand across the eight markets tracked by Mortenson. During the quarter, trade partner work increased +1.6% and construction materials rose +1.4%. Over the past 12 months, materials increased +6.0% and trade partner work rose +5.2%. 

Labor Costs Move Higher

Mid-year cost movement reflected annual collective bargaining adjustments in Chicago, Minneapolis, Milwaukee and Seattle, contributing to the stronger labor escalation often seen in the second quarter.

Labor availability remains generally manageable, but localized constraints persist. Electrical trades remain the most notable pressure point, particularly in Chicago and Milwaukee, where limited electrician availability can increase reliance on overtime and elevate project costs. 

Regional Markets Remain Uneven

Data center and advanced manufacturing construction continues to shape market conditions, particularly in Chicago and Milwaukee. These projects are sustaining demand for electrical trades, steel, and other specialized scopes even as parts of the broader construction market remain more competitive.

Trade partner competition remains strong across tracked markets, though conditions vary by region. Pacific Northwest markets continue to see aggressive bidding, with some firms absorbing increases or reducing fees to secure work. Similar competitive conditions exist in the Midwest and Southwest, although bidding dynamics vary by project size, volume and demand.

Supply Chains Stay Resilient Amid Volatility

Global supply chains remain generally stable, while select equipment categories face procurement challenges. Electrical infrastructure remains among the most constrained categories, with power transformers, high-voltage circuit breakers and other power-distribution equipment facing extended lead times, including lead times beyond two years for certain large power equipment. Constraints remain concentrated in utility, grid-infrastructure and large data center projects rather than the broader construction market.

Tariff Impacts Continue to Evolve

The expiration of the temporary Section 122 tariff on July 24, combined with new Section 301 actions and continuing Section 232 tariffs, is adding complexity to the sourcing environment. The full impact of these changes was not yet reflected in second-quarter pricing and may become clearer in coming periods, particularly as suppliers and contractors work through inventories, contracts and procurement commitments. 

Transportation Costs Move Higher

Trucking and ocean freight costs increased amid higher fuel, insurance and operating expenses and geopolitical disruption. Capacity remains generally available, making transportation a secondary cost driver compared with labor, metals and electrical equipment.