Construction owners and developers face continued pressure to establish reliable project budgets as material prices, labour availability and energy markets influence construction costs. The Beck Group's updated 2026 outlook projects nonresidential construction cost escalation between 4.1% and 4.6%, with the national midpoint rising to 4.35% from 4.25%.
The forecast, published Oct. 12, incorporates several factors affecting project delivery, including tariffs on building materials, labour constraints and uncertainty in energy markets. Aluminium, steel and copper products have experienced price pressure, while demand for data center construction has intensified competition for skilled tradespeople.
The outlook assumes no major energy shocks, significant new material disruptions or unexpected changes in construction wages and economic policy. Changes to those conditions could affect actual project costs.
For owners planning new facilities or major renovations, the projections underscore the importance of updating estimates as procurement decisions approach and market conditions change.
Expansion of data centers for artificial intelligence and cloud computing continues to support construction activity, particularly across the U.S. Sun Belt. Texas remains one of the country's leading markets for data center development.
The sector's demand for electricians and heating, ventilation and air conditioning technicians has increased competition for workers who are also needed on other commercial and infrastructure projects. Higher wages and recruitment incentives in data center construction can add pressure to labour budgets elsewhere.
Energy prices present another source of uncertainty. Because energy is an input for producing and transporting many construction materials, price volatility can influence procurement costs and supply chains.
At the same time, restrictions and proposed moratoriums on some data center developments could moderate demand for certain construction materials if projects are delayed or cancelled. The resulting market effects will depend on how development activity and local regulations evolve.
Demand extends beyond data centers, with activity reported across healthcare, higher education, cultural facilities, hotels, religious buildings and premium office properties.
Adaptive reuse is also gaining attention as owners consider converting underused office buildings into residential or mixed-use properties. High office vacancy rates, housing shortages and government funding for conversions are among the factors supporting these projects.
Financing remains a challenge for some developers. Persistent inflation has complicated expectations for interest-rate reductions, while elevated borrowing costs can make projects more difficult to finance. Geopolitical tensions also pose risks to material availability, energy prices and supply-chain stability.
Contractor backlogs provided a measure of support during the first half of 2026, partly through infrastructure work. However, Associated Builders and Contractors reported that its Construction Backlog Indicator fell to 8.0 months in July, down from June. Contractors in the South and larger contractors continued to report comparatively stable backlogs.
Architectural firms have also reported stronger inquiries, suggesting that some owners are reconsidering paused projects or evaluating new development opportunities. The pace of future activity remains dependent on financing conditions and broader economic developments.
The Beck Group's forecast provides construction owners, developers and contractors with an updated reference point for budgeting and procurement decisions in 2026. Material volatility, skilled-labour competition and financing costs can affect project feasibility, contingency requirements and delivery schedules.
Owners can use the outlook to reassess estimates, evaluate procurement timing and monitor exposure to labour-intensive building systems and energy-sensitive materials. Actual escalation will vary by location, project type, specifications and procurement strategy.
Source: Beck Group.
