{"id":1004778244,"date":"2025-11-17T05:23:38","date_gmt":"2025-11-17T13:23:38","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004778244"},"modified":"2025-12-05T05:15:42","modified_gmt":"2025-12-05T13:15:42","slug":"will-construction-costs-go-up-in-2026","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/","title":{"rendered":"Will Construction Costs Go Up in 2026?"},"content":{"rendered":"\n

Construction spending, which dropped 4.7 percent this year, is expected to increase slightly in 2026. But the projected increase\u2014just 0.4 percent\u2014is a sign that policy volatility, including tariffs, will continue to impact the U.S. market, according to JLL\u2019s latest construction cost forecast<\/a>.<\/p>\n\n\n

\n
\"Louis<\/a>
Louis Molinini, Head of Project and Development Services for the Americas, JLL. Image courtesy of JLL<\/em><\/figcaption><\/figure><\/div>\n\n\n

JLL estimates overall construction spending to rise from $2.045 trillion this year to $2.053 trillion in 2026 and $2.137 trillion in 2027. The report expects non-residential construction spending to remain at about $681 billion for both 2026 and 2027, down from $708 billion this year and $751 billion in 2024. Residential construction spending is expected to increase from $862 billion this year to $879 billion and $938 billion in 2027. Construction spending on civil engineering projects is estimated to go from $475 billion in 2025 to $493 billion next year and $518 billion in 2027.<\/p>\n\n\n\n

The forecast<\/a>, released by JLL Project and Development Services, details how real estate investors and decision-makers can navigate the ongoing pressures and changes to construction economics to take advantage of opportunities.<\/p>\n\n\n\n

While much of the construction industry was at a standstill in 2025 due to policy uncertainty, Louis Molinini, JLL\u2019s head of project and development services for the Americas, said there is more clarity as the year winds down that enables strategic positioning for organizations that are ready to move forward with projects that had been put on hold or new developments.<\/p>\n\n\n\n

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READ ALSO<\/strong>: CRE Lending Momentum Hits Highest Level Since 2018<\/a><\/p>\n\n\n\n

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Molinini said many had taken a wait-and-see approach on 2025 construction projects rather than undertake a solution that could be impacted by a sudden change in trade policy.<\/p>\n\n\n\n

\u201cI think now as we\u2019re starting to see some stability in those (tariffs), we can come up with solutions and work with our clients to determine the right path forward. So, you\u2019re seeing more and more clients be willing to start advancing projects,\u201d he told Commercial Property Executive.<\/em><\/p>\n\n\n\n

\u201cWe\u2019ve been working with clients to understand in real time, sourcing of materials by country so that we can understand potential impacts, having multiple suppliers, leveraging our strategic global suppliers and our purchasing power as a firm and that of our clients to drive those decisions and get the best outcome for our clients,\u201d he added.<\/p>\n\n\n\n

\"Chart<\/a>
Construction spending and annual growth by sector<\/a>. Chart courtesy of JLL Research, Oxford Economics, U.S. Census Bureau<\/em><\/figcaption><\/figure>\n\n\n\n

Material costs to rise<\/h2>\n\n\n\n

Those strategies will continue to be important in 2026 because material cost pressures are expected to intensify throughout the year ahead. While JLL\u2019s mid-year construction outlook<\/a> estimated material costs to increase as much as 7 to 12 percent, the overall increase averaged 4.2 percent above 2024 prices. That was mainly due to slower activity and suppliers burning off stockpiled materials, Molinini said. But material cost increases could range from 5 percent to 25 percent depending on the material, with an aggregate increase of about 8 percent based on current policy levels, the report noted.<\/p>\n\n\n\n

Costs of materials vary by category, with mechanical and electrical components being the most in demand, particularly by the growth in data center development<\/a> and other industries like manufacturing, health-care and infrastructure projects that also rely heavily on mechanical and electrical components, Molinini said.<\/p>\n\n\n\n

Asked whether suppliers are still absorbing tariff increases, Molinini said it varies.<\/p>\n\n\n\n

\u201cSome are being more aggressive than others in terms of absorbing those costs to spur activity and gain market share,\u201d he said.<\/p>\n\n\n\n

That\u2019s why JLL recommends proactive management in procurement and design decisions as well as negotiating with multiple suppliers.<\/p>\n\n\n\n

\u201cWhile the market is slow or slower in certain pockets, sectors or industries, you can come at it from a position of negotiating strength to try to minimize the impact to your project,\u201d Molinini said. \u201cWill we get to a point where all of those manufacturers and suppliers pass through everything because they\u2019re so busy and there\u2019s so much activity, they don\u2019t need to incur the cost? That could be a very real outcome. But until the activity is at a point where that\u2019s the case, we won\u2019t really know.\u201d<\/p>\n\n\n\n

\"Chart<\/a>
Material cost growth in 2025 and additional trade impacts. Chart courtesy of JLL Research, U.S. Bureau of Economic Analysis, U.S. Census Bureau<\/em><\/figcaption><\/figure>\n\n\n\n

Regional construction activity<\/h2>\n\n\n\n

The JLL report notes that policy impact varies across the U.S. with some regions seeing more specific types of construction activity. For example, Molinini said investments in artificial intelligence are driving data center activity and office leasing in Northern California.<\/p>\n\n\n\n

\u201cFrom an office perspective, our technology clients are growing. They\u2019re expanding and they\u2019re hiring. So, we have a number of assignments that are supporting the growth of our technology clients from an office footprint perspective,\u201d he said.<\/p>\n\n\n\n

The report also notes creative and adaptive projects are moving forward. For example, JLL states office-to-residential conversions nearly doubled in 2025, \u201cdemonstrating how format flexibility and vision enable operators to capitalize on fundamental needs.\u201d<\/p>\n\n\n\n

Molinini said the type of office-to-residential work they are seeing is very much region by region and driven largely by the age of the existing building stock and vacancy rates.<\/p>\n\n\n\n

\u201cYou really have to go city by city to really understand what\u2019s driving the non-residential market in that city,\u201d he said. \u201cIt goes back to the broader economic trends in those regions and the industry that\u2019s based there and the outlook for that industry.\u201d<\/p>\n\n\n\n

Looking ahead to 2026 and 2027, he said he expects to start to see some advanced manufacturing projects get underway. He noted the pharmaceutical sector<\/a> has already started picking sites for new U.S. facilities and announcing dates to begin development of more onshore manufacturing.<\/p>\n","protected":false},"excerpt":{"rendered":"

How policy volatility continues to impact development and what that means for commercial real estate decision-makers next year.<\/p>\n","protected":false},"author":1068,"featured_media":1004778292,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21782,21808,23891,21742,52682,51037],"tags":[32796],"class_list":["post-1004778244","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-development","category-featured","category-national","category-latest","category-policy","category-trends","tag-jll"],"acf":[],"yoast_head":"\nWill Construction Costs Go Up in 2026? - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"Policy volatility, including tariffs, will continue to impact the U.S. construction market in 2026 and 2027, according to a new JLL report.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Will Construction Costs Go Up in 2026?\" \/>\n<meta property=\"og:description\" content=\"Policy volatility, including tariffs, will continue to impact the U.S. construction market in 2026 and 2027, according to a new JLL report.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2025-11-17T13:23:38+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-12-05T13:15:42+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/11\/Molinini_Louis.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Gail Kalinoski\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/\",\"name\":\"Will Construction Costs Go Up in 2026? - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/11\/Molinini_Louis.jpg\",\"datePublished\":\"2025-11-17T13:23:38+00:00\",\"dateModified\":\"2025-12-05T13:15:42+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/fc5b5df1393e5023d2417bd48c2fda57\"},\"description\":\"Policy volatility, including tariffs, will continue to impact the U.S. construction market in 2026 and 2027, according to a new JLL report.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/will-construction-costs-go-up-in-2026\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/11\/Molinini_Louis.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/11\/Molinini_Louis.jpg\",\"width\":800,\"height\":620,\"caption\":\"Louis Molinini, Head of Project and Development Services for the Americas, JLL. 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