Washington,July 13, 2026__Construction firms bidding US projects in 2026 are running into a cost environment that looks less like a temporary spike and more like a permanent recalibration.
Tariffs, energy prices, and a labour market that cannot expand fast enough have combined to push nonresidential construction costs well above pre-pandemic trend lines, and multiple independent industry trackers now agree the pressure is building rather than easing.
According to JLL’s 2026 Construction Perspective: US Mid-year Update, final-cost indices are running roughly 5% higher year-over-year, with further acceleration expected in the second half of the year.
Mortenson’s Q1 2026 Construction Cost Index put national nonresidential cost growth at 6.8% over the previous twelve months, while separate data from the Associated Builders and Contractors (ABC) showed nonresidential input prices surging at a 12.6% annualised rate in the first two months of 2026 — the fastest pace since the supply-chain disruptions of early 2022.
For contractors and developers, the takeaway is not simply that costs are up. It is that three structural forces — trade policy, energy prices, and a labour market that cannot relocate to where the work is — are now reinforcing each other, and none of them appears likely to reverse before 2027.
Tariffs Are No Longer a Side Issue
Trade policy has moved from background risk to a direct line item on every steel-, aluminium-, or copper-heavy project.
JLL’s report points to a June 8 Section 232 expansion that brought metal furniture and workstations under tariff rates as high as 50%, on top of existing duties on structural steel, aluminium, and copper.
That exposure shows up clearly in sector-specific data. Steel-intensive projects are now absorbing an estimated $15 to $25 per square foot in embedded tariff costs on mid-rise multifamily work, depending on the structural system, according to a Q2 2026 construction cost outlook.
Copper-heavy mechanical, electrical, and plumbing packages have been hit particularly hard — a dynamic that matters for data centre and industrial projects where copper demand is already elevated.
There is a legal wrinkle contractors should track. Trade policy analysts note that a Supreme Court ruling has curbed the use of broad emergency powers to impose tariffs, requiring congressional authorisation for that route going forward.
In practice, this pushes policymakers toward more targeted tools — Section 232 national security tariffs and Section 301 unfair-trade-practice tariffs — which have already been used to keep steel, aluminium, and copper duties at 50%.
A renegotiated USMCA has removed some country-level surcharges on qualifying goods, but it does not touch Section 232 metals tariffs, leaving the primary cost exposure for structural materials unaddressed.
Labour Shortages Are Structural, Not Seasonal
If tariffs are the more visible pressure, labour may be the more durable one. Construction employment growth is tracking at just 0.6% in 2026, far below the historical average of 2.7%, according to JLL.
That gap is not evenly distributed: 61% of US metro markets are currently supply-constrained for construction labour, and that figure is projected to rise to 72% by 2027.
The reason this matters more than a typical skills shortage is mobility. Construction workers cannot easily relocate to fill gaps in other regions the way some other trades can, which means the imbalance is structural rather than a temporary bottleneck that resolves as hiring catches up.
Andrew Volz, research manager for project and development services at JLL, said the labour environment that owners bidding 2027 and 2028 projects will face is already visible in today’s supply-constrained markets.
Separate industry estimates put the scale of the shortfall at roughly 439,000 additional workers needed in 2025 and nearly 500,000 in 2026 to meet projected demand, with about 94% of contractors reporting difficulty filling open positions.
Wage growth is following: construction wages are up more than 4% year-over-year nationally, and 9% to 11% in high-demand markets and specialised trades.
Data Centres Are Crowding Out Everyone Else
The clearest evidence that this cycle is different from previous cost run-ups is the way data centre construction is reshaping bidding conditions for unrelated projects.
Data centre starts are up more than 15% year-over-year, with over $400 billion in future projects already announced, making 2026 the most active year on record for the sector.
That demand is pulling crews, subcontractors, and materials away from other work. JLL’s data shows contractors with data centre exposure now carry average backlogs of 12.2 months, compared with 8.3 months for contractors without it, while non-data-centre commercial construction spending for office, industrial, or mixed-use projects is growing at under 1% in real terms.
Louis Molinini, head of project and development services for the Americas at JLL, put it directly: contractors competing for the same crews as data centre work “will feel it in cost and schedule now.”
His point is less about any single project than about timing — firms that recognise the overlap between hot real estate markets and hot data centre markets before their bids come back high are better positioned than those that discover it at tender stage.
Regional Variation Still Matters for Bidding Strategy
Cost escalation is not uniform, and that unevenness is itself useful information for procurement planning.
Mortenson’s Q1 2026 index recorded some of the sharpest twelve-month gains in Salt Lake City (9.75%), Denver (10.37%), and Milwaukee (10.32%), while Portland (2.55%) and Seattle (4.15%) posted far more moderate increases.
Chicago’s costs, meanwhile, appear to be driven more by labour pricing than by materials, according to economist commentary compiled by Urban Land Magazine.
For contractors bidding across multiple US metros, this variation argues against applying a single national escalation assumption to every project.
Markets with heavy data centre or advanced manufacturing activity are absorbing a disproportionate share of the labour and materials squeeze, while others remain comparatively manageable.
What This Means for Contractors Now
The consistent message across JLL, Mortenson, and ABC data is that this is not a cycle contractors can wait out.
Fewer than one in five contractors expect profit margins to compress over the next six months — a level of confidence not seen since early 2025 — suggesting the industry is pricing the higher cost baseline into bids rather than absorbing it.
Molinini’s assessment is blunt: the cost pressures on materials and labour have staying power, the policy environment is still moving, and firms planning projects over the next three to five years will not benefit from waiting a quarter or a year in the hope that conditions ease.
The more defensible strategy, in his view, is negotiating costs and risk-sharing now rather than betting that tariffs, energy prices, or labour markets settle back to pre-2026 norms.
For contractors and developers weighing procurement timing, the practical implications are threefold: lock in pricing and crew commitments early in markets with data centre exposure; treat tariff-exposed materials — steel, aluminium, copper — as a distinct line item rather than folding them into a general contingency; and use regional cost data rather than national averages when setting budgets, since the gap between the fastest- and slowest-escalating metros now exceeds seven percentage points.
Also Read
- Canada’s Biggest Infrastructure Projects to Watch in 2026
- The Future of Solar Energy in Africa:Trends, Challenges, and Opportunities Through 2035
She brings insightful analysis and in-depth reporting to the sector, highlighting innovations and developments that shape Africa’s built environment.
- US Construction Costs Keep Climbing in 2026: Why Contractors Are Facing a Structural Shift, Not a Cycle - July 13, 2026
- Inside the ISFF: What South Africa’s New Construction Mafia Framework Actually Requires - July 9, 2026
- South Africa Clears Four REIPPPP Solar Projects for Construction, Adding Over 1GW to National Grid - July 9, 2026
