Construction Cost Overview – Minneapolis

Construction Cost Ranges (2024–2025)

In Minneapolis, construction cost escalation has moderated in recent quarters, aligning more closely with historical norms. The Mortenson Construction Cost Index indicates a year‑over‑year increase of approximately 6–7%, with quarterly growth around 1–2%—a return to more predictable escalation patterns after prior volatility.

Multifamily mid‑rise projects, particularly apartment buildings, have become financially challenging. Developers report that per‑unit costs have reached levels that require sales prices well above market averages or public subsidies to remain viable.

Labor Cost Trends & Equipment Hire

Compensation costs in the Minneapolis–St. Paul area have risen notably. As of March 2025, total compensation for private‑industry workers increased by about 5.7% year‑over‑year, with wages and salaries matching that pace—well above national averages. Mid‑2025 data shows similar trends, with wages continuing to climb at roughly 5–6% annually.

Trade labor, journeyman, and subcontractor rates are under upward pressure, driven by strong demand, retirements, and shortages in skilled trades. While precise local rate data varies by trade, firms report widespread wage increases across most categories.

Equipment hire costs—daily, weekly, and monthly—have also risen, though less sharply than labor. Competitive market conditions and softening commodity demand have helped stabilize rental pricing, offering some relief to contractors.

Local Cost Drivers

• Permits & Fees: Minneapolis calculates building permit fees based on job valuation, including labor and materials. Express limited permits are available for pre‑approved licensed contractors working on small residential projects, streamlining the process.
• Site Access & Delivery: Urban site constraints, traffic management, and delivery logistics in dense areas can add indirect costs. Infrastructure projects, such as bridge maintenance or transit expansions, may also affect access.
• Material Delivery: Tariffs, particularly on imported lumber and steel, continue to introduce uncertainty. While input price increases have moderated, many firms still face 6–13% cost hikes on key materials.

Current Economic Context

Economic conditions in Minneapolis’s construction sector remain cautious. A Federal Reserve Bank survey found that many firms experienced project delays or cancellations in early 2025, with nearly half reporting reduced activity compared to the prior year. Input cost pressures persist, though less intense than in previous years, and competition for fewer available projects has squeezed margins.

Simultaneously, the multifamily construction pipeline has contracted sharply. Apartment permits in the Twin Cities dropped from over 15,000 in 2022 to around 5,000 in 2023, with continued declines into 2024. This slowdown, combined with rent control policies, has contributed to a modest decline in median rents—down approximately 6% year‑over‑year as of mid‑2025.