- JLL says final construction cost indices are about 5% higher than a year ago, with more contractor repricing expected in late 2026.
- JLL reports goods-level material prices rose 6.4% year over year, outpacing the 3.5% increase in final-demand prices.
- Labor remains constrained in 61% of US metro markets, and JLL expects that share to reach 72% by 2027.
According to Globe St, JLL expects construction costs to face more pressure later in 2026 as contractors defend margins. Its 2026 US Construction Perspective midyear update puts final-cost indices about 5% above year-ago levels. The firm says prices are already approaching the top of its earlier forecast range.
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Construction Costs Face More Bid Repricing
Goods-level material prices increased 6.4% year over year, according to JLL. Final-demand prices rose 3.5% during the same period. That gap indicates contractors have not yet passed the full input increase into bids. JLL expects more of that difference to close during the remainder of 2026. The firm says contractors have little room or appetite to preserve pricing by squeezing margins further.
Materials Keep Adding Pressure
JLL points to tariffs across metals, lumber, machinery, and equipment. Structural steel, aluminum, and some other products face tariff rates of 50%. The firm previously set about 8% as the upper bound for full-year materials inflation. It now sees a meaningful chance of reaching that level. Similar cost pressures have already driven repricing in multifamily construction, alongside persistent labor constraints. Copper prices are up 36% year over year. Aluminum increased 45%, while US hot-rolled coil steel rose 27%.
Specialty Labor Remains Tight
Construction employment is growing at an annual rate of 0.6%, compared with a historical average of 2.7%, according to JLL. The firm estimates that 61% of US metro markets are supply-constrained. It expects that share to reach 72% by 2027. Electricians and HVAC technicians are among the tightest trades. Mechanical contractors, pipefitters, and equipment operators also face strong competition. Data center and power infrastructure construction are drawing from the same limited specialty labor pool.
The Details
JLL also sees less potential relief from interest rates than it expected earlier. Its prior outlook assumed lower rates could offset some cost pressure. Federal Reserve projections in June instead shifted toward the possibility of a rate increase. Owners outside major data center and power infrastructure markets may still find competitive capacity. Projects using fewer constrained specialty trades could also have more options among small and midsized contractors.
What’s Next
Contractors are already pricing 2027 and 2028 work against a higher cost baseline, according to JLL. Owners that engage contractors earlier may improve their ability to secure capacity and terms before more input inflation reaches bids. The source describes the current period as a narrowing procurement window. That window may be more favorable for projects with less exposure to the most constrained labor and infrastructure markets.
