Construction costs are expected to continue rising through the second half of 2026 as trade policy changes, labor shortages and strong demand for data center construction put pressure on contractors, according to JLL's 2026 Construction Perspective: U.S. Mid-year Update.
JLL reports final construction costs are increasing about 5% year over year, with additional acceleration expected later this year. Markets with significant data center development are seeing the greatest cost increases and contractor capacity constraints.
According to the report, contractors working on data center projects have an average backlog of 12.2 months, compared with 8.3 months for contractors focused on other commercial construction sectors.
Labor shortages also remain a concern. Construction employment growth is projected at 0.6% in 2026, well below the historical average, while 61% of U.S. metro areas are experiencing labor supply constraints. That figure is expected to increase to 72% by 2027.
JLL also cited higher material costs tied to trade policies, including Section 232 tariffs on steel, aluminum and copper, as well as rising energy prices that continue to affect construction materials.
The report concludes that contractors are increasingly incorporating higher labor and material costs into project bids, making early procurement and planning more important for owners preparing projects over the next several years.
