Construction Costs Soar as Contractors Face Higher Material and Labor Costs

Construction costs are set to rise further as contractors reprice their bids due to increasing material and labor costs. According to JLL, final construction cost indices are about 5% higher than a year ago, with more contractor repricing expected in late 2026.

JLL reports that goods-level material prices rose 6.4% year over year, outpacing the 3.5% increase in final-demand prices. This gap indicates that contractors have not yet passed the full input increase into bids, and JLL expects more of this difference to close during the remainder of 2026.

The firm points to tariffs across metals, lumber, machinery, and equipment as a major contributor to rising material costs. Structural steel, aluminum, and some other products face tariff rates of 50%. Copper prices are up 36% year over year, while aluminum increased 45%, and US hot-rolled coil steel rose 27%.

Construction employment is growing at an annual rate of 0.6%, compared with a historical average of 2.7%. JLL estimates that 61% of US metro markets are supply-constrained, and it expects this share to reach 72% by 2027. Electricians and HVAC technicians are among the tightest trades.