Rising labor and material costs continue to create procurement and budgeting challenges for nonresidential construction, even as competitive bidding provides opportunities in some markets. Mortenson’s third-quarter 2026 Construction Cost Index found that costs remained relatively stable overall during the first half of the year, with sharper increases concentrated in electrical systems, metals and specialized work.
The national nonresidential construction cost index increased 1.58% during the quarter and 5.60% year over year. Across the eight metropolitan areas tracked by Mortenson, quarterly increases ranged from 0.60% in Milwaukee to 2.86% in Minneapolis.
Trade partner costs increased 1.6% during the quarter, while construction materials rose 1.4%. Over the previous 12 months, trade partner costs increased 5.2% and materials rose 6%.
Labor escalation was particularly evident in Chicago, Minneapolis, Milwaukee and Seattle, where scheduled collective bargaining adjustments contributed to higher costs. Electrical labor remains a more significant constraint in Chicago and Milwaukee, where limited electrician availability can increase overtime requirements.
Electrical systems recorded the largest quarterly scope increase at 3.4%, followed by miscellaneous metal fabrication at 3.3% and structural steel and metal decking at 3.2%. Reinforcing material increased 2.9%, while cast-in-place concrete rose 2% and fire protection systems increased 1.7%.
Demand from large data center and advanced manufacturing projects is contributing to higher demand for electrical trades, steel and other specialized scopes in markets such as Chicago and Milwaukee.
Electrical equipment also remains a procurement concern for certain major projects. Power transformers and high-voltage circuit breakers can face lead times exceeding two years, particularly for utility, grid infrastructure and large data center developments.
Material sourcing conditions remain affected by tariffs, energy costs and geopolitical disruptions. Changes to U.S. tariff policies during 2026 had not been fully reflected in the second-quarter pricing captured by the index, according to Mortenson.
Transportation costs also increased because of higher fuel, insurance and operating expenses, although transportation capacity remained generally available.
At the same time, trade partner competition remains strong in several markets. Some commercial and institutional projects are seeing more aggressive bidding as contractors and specialty trades pursue available work.
The latest cost data reinforces the importance of early procurement and project-specific cost planning, particularly for projects requiring substantial electrical infrastructure, structural steel or specialized labor.
For owners and developers, regional cost differences and trade availability can materially affect budgets and schedules. Projects tied to data centers, advanced manufacturing, power infrastructure and other large-scale developments may face different procurement conditions from conventional commercial or institutional work.
Source: Mortenson.
