Construction Costs Surge Early 2026

Cost Increases Hit the Sector

Construction costs have surged at the beginning of 2026, with prices for both materials and labor sharply up. According to Bisnow, Associated Builders and Contractors (ABC) reported a 12.6% annualized increase in construction input costs during January and February, with nonresidential construction expenses rising 3.7% year-over-year.

Overall construction costs are now 3.1% greater than the same point last year. Energy price hikes were a primary force, with natural gas prices up nearly 11% in a single month and crude petroleum up 2%.

Rising Energy Costs Impact Construction

ABC’s analysis, using US Bureau of Labor Statistics data, highlights energy as the key factor behind the spike. At the same time, policy shifts and trade pressures are compounding cost burdens across the industry, adding another layer of uncertainty for developers already navigating volatile input pricing. Ongoing conflict in the Middle East further complicates the outlook, as Brent crude oil prices soared roughly 50% after Feb. 28, reaching more than $112 per barrel by late March.

ABC Chief Economist Anirban Basu warned that persistent energy volatility could drive construction costs even higher, both through direct diesel price increases and higher shipping costs for other materials. The sector faces additional headwinds from slow project starts, tariffs, and shrinking backlogs, signaling ongoing pressure for construction costs throughout 2026.