Dive Brief:
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A sure sign of a recovering real estate market: rising commercial construction costs.
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Minneapolis-based construction giant M.A. Mortenson Co., which compiles an index of construction costs, is advising its customers to budget for a 5% to 6% increase in rising expenses this year. One of Mortenson’s projects is the Minnesota Vikings stadium.
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Greg Clark, the firm’s vice president of estimating, told The Wall Street Journal that labor costs are rising 2.5% to 3.5% per year, and the cost of most materials has inflated slightly.
Dive Insight:
A lack of competition among contractors is behind the bulk of the increases in the price of construction, Clark said. So many firms went out of business during the recession and so many trades left for other industries, that those who remain can charge more because they know project managers won’t be able to find anyone else to do the work for cheaper.