On February 5, Mortenson released its quarterly Construction Cost Index report for Phoenix along with five other metropolitan areas in the U.S.  According to the report, non-residential construction labor, material and equipment costs in the greater Phoenix area are forecasted to increase 3% in 2015.While costs fell in the latest quarter and there was 6% decline in local, non-residential construction employment last year according to data from the Bureau of Labor Statistics, Phoenix is expected to experience labor shortages due to the effects of healthy construction activity in California, Utah and Colorado.After recording flat growth throughout 2014, a dip in quarter four brought the Phoenix index two points below the national average. This is the first time the local index has dropped below the national index since early 2011.

“I’m concerned about the upswing in costs in the surrounding states.  Those in California, Utah and Colorado have been and will continue to pull labor from Arizona,” said Ty Bohlender, chief estimator, Mortenson. “At some point we will be dramatically affected by the depletion of local labor as work picks up again in Arizona. Moreover, at some point the national trend for material price increases will surface here regardless of local market conditions.”

Currently prices of building materials and components for electrical systems in Phoenix experienced a decline. All other categories experienced remained flat or experienced a slight decline.

Mortenson tracks and reports on six metropolitan areas in the U.S. including Minneapolis, Milwaukee, Chicago, Denver, Phoenix 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.  The Construction Cost Index is available for download at http://www.mortenson.com/company/news-and-insights/construction-cost-index.