Copper, lumber contribute to rising construction costs

Construction costs nationally rose 2.7% in the second quarter of this year as commodities, including lumber and copper, grew more expensive, according to a national cost index.

Costs rose 5.4% compared to a year ago, according to the Mortenson Cost Index, which is maintained by the Minneapolis-based contractor.

“Construction starts rebounded across most sectors in May and saw solid growth in June, with particular strength in manufacturing and data center construction,” Dodge Construction Network Associate Director of Forecasting Sarah Martin stated in a news release. “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.”

In the Minneapolis market, construction costs were just slightly below national levels. Costs rose 2.5% this quarter and 5% over the last twelve months. ​

Contractors have largely not yet seen large cost increases due to tariffs, but they’re watching for signs of price jumps in imported materials, said Gabe Fox, chief estimator for Mortenson in Portland.

General contractors have “a hyper awareness” of tariff costs and are working with clients, but also urging them not to overreact to tariff effects that haven’t showed up yet, Fox said.

Data center work is buoying contractors in Minnesota and other regions, Mortenson officials said.

“The growth in the data center market — it’s definitely booming, and it’s going to continue to boom for quite a while,” Fox said.

Fox said he expects the multifamily and hospitality sectors to pick up construction activity in coming months.

Commodities prices continue to show volatility, according to the Mortenson Cost Index. Lumber has risen 30% in price in the past two years, followed by increases in copper pipe (up 20%), plywood (up 12%) and copper wire (up 10%).

Lumber — much of which is imported from Canada — is especially vulnerable to tariffs. Tariffs on Canadian lumber jumped to 35% in August.

“It is a concern,” Fox said. “From a construction material standpoint, lumber would be one of those concerns because of where it’s coming from, and those negotiations that are still happening.”

Copper prices tend to be driven by demand, which has been strengthened by data center and electrical infrastructure work, Fox said.

Nationally, construction labor costs have risen 4.9% during the past 12 months, Mortenson’s cost index found.