Construction costs are set to rise through the latter half of 2026, driven by evolving trade policies, labor shortages, and surging demand for data centers, according to JLL's latest report. This trend signals a critical juncture for the construction industry, affecting project planning and budget allocations.
What Happened
JLL's 2026 Construction Perspective: U.S. Mid-year Update highlights a significant 5% year-over-year increase in construction costs, with further acceleration anticipated. Key factors include trade policy shifts, such as Section 232 tariffs on materials like steel, aluminum, and copper, which have driven up material costs. Additionally, energy prices remain high, further impacting construction materials.
Demand for data centers is particularly intense, pushing contractor capacity to its limits. Contractors engaged in data center projects report an average backlog of 12.2 months, compared to 8.3 months for other commercial sectors. Labor shortages exacerbate these challenges, as construction employment is expected to grow by only 0.6% in 2026, significantly below historical averages. JLL notes that 61% of U.S. metro areas are currently experiencing labor shortages, a figure projected to rise to 72% by 2027.
What This Means for Your Business
For AECM industry players, these developments underscore the importance of strategic planning and early project procurement. With contractors increasingly factoring higher labor and material costs into bids, businesses must adapt to maintain competitive positioning and optimize ROI. Understanding the impact of trade policies and preparing for labor constraints will be essential to navigating the challenging landscape.
Moreover, the heightened demand for data centers presents both an opportunity and a challenge. While it opens avenues for new projects, it also means stiffer competition for contractor availability and resources. Firms should consider diversifying their contractor networks and investing in technologies that enhance project efficiency to stay ahead.
What US Operators Should Watch
Industry stakeholders must keep a close eye on federal trade policy developments, particularly regarding tariffs affecting material costs. Monitoring labor market trends and preparing for potential increases in labor shortages is also crucial. As the demand for data centers continues to climb, businesses should evaluate their capacity to compete for such projects and adjust their strategies accordingly to capitalize on this growing market.
To mitigate risks, early procurement and planning cannot be overstressed. Establishing strong relationships with suppliers and contractors and exploring alternative materials and methods may offer cost-saving avenues.
Source: https://www.forconstructionpros.com/business/business-services/financing-insurance-leasing/article/22970723/jll-jll-construction-costs-expected-to-rise-through-the-second-half-of-2026. Read the original story ->
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