Global Construction Costs Index 2026

JLL's Global Construction Costs Index reveals that construction cost escalation is broadly stabilizing at a new baseline of 3% to 6% annual increases, with global average construction cost inflation for 2027 forecast between 3.1% and 4.2%.

Construction and development programs have spent several years navigating uncertainty, economic fluctuation and geopolitical disruption. As of October 2026, JLL forecasts that global construction costs will rise by 3.1% to 4.2% in 2027, after 3.5% to 4.7% in 2026. Annual escalation of 3% to 6% is now the planning baseline, up from 2% to 3% before 2020. Since 2020, construction wages have also risen 8% to 35% across markets.

• Construction cost escalation is broadly stabilizing, but at a higher rate than before. Annual increases of 3% to 6% represent a new baseline assumption across markets, reflecting sustained cost increases and economic uncertainty.
• Global geopolitical events directly and indirectly affect construction costs through material price volatility, energy costs and supply chain disruption that extends lead times. Construction inflation continues to exceed consumer price inflation in most markets, highlighting the sector's vulnerability to global economic and geopolitical shocks that affect input costs and tender prices.
• Labor cost pressures are structural, with construction wages rising 8% to 35% across markets between 2020 and 2026. Aging workforces and skilled trade shortages are tightening supply, particularly in electrical, technology and mechanical trades. Rising AI-driven demand for manufacturing facilities, high-performance offices and data centers is intensifying competition for these specialist skills.
• Viability is shifting in this higher-cost environment, so understanding cost profiles and emerging pressures is critical to responding effectively. Higher-performing sectors such as industrial and data centers are absorbing increases better as market values rise. However, AI and technology assets add pressure, raising demand for specialist labor and materials and extending lead times for cooling and heating, ventilation and air conditioning (HVAC) equipment.
   

This report draws on JLL's proprietary Construction Costs Index, Construction Costs Monitor and Projects database, covering more than 1,000 projects across six building types in 14 markets. 

Global construction costs are forecast to rise by 3.5% to 4.7% in 2026. Over the past five years, costs have risen by an average of 25% to 30% across global markets and by as much as 40% in some. Supply chain disruption and energy volatility have interacted with local conditions such as contractor risk appetite and financing costs to drive these increases. Annual escalation of 3% to 6% now represents the baseline, a structural shift from the pre-2020 norm of 2% to 3%.

Looking ahead, JLL forecasts that global construction costs will rise by a further 3.1% to 4.2% in 2027. In North America (3.2% to 4.2%), material costs, US trade policy and labor shortages are the main pressures. The Middle East (3.4% to 5.4%) is easing from 5.7% to 7.7% in 2026, although the conflict continues to affect supply chains. Europe (2.2% to 3.5%) reflects challenging economic conditions and increased contractor competition. Asia Pacific (3.8% to 4.7%) faces more significant impacts from the Middle East conflict.

Construction costs are determined by a complex interaction of global forces and local market conditions. On the input side, organizations face factors largely beyond their control: global and local energy prices, base material costs, transport and shipping rates and labor costs. Volatile material and commodity prices have driven up construction costs globally, straining supply chains and contractor margins. Persistent labor shortages and annual wage growth add further cost and schedule pressure.

Looking to 2027, input costs face cautious stabilization at elevated levels. Energy markets should settle after a volatile 2026, but the Middle East conflict persists, so contractors will keep pricing in uncertainty as a permanent risk premium. Material and commodity prices should stabilize but not decline.

Over the past five years, tender price inflation (TPI) has outpaced consumer price inflation (CPI) in most markets, with the widest gaps in Germany, Australia and Singapore. The two are broadly in line in the UK, Spain, Canada, France and China. The gap shows how geopolitical events, energy price volatility and trade disruption transmit disproportionately into construction costs.

Construction wages rose 8% to 35% across markets between 2020 and 2026 and by 1% to 6% on average over the past year. The drivers are structural rather than cyclical: aging workforces, skilled trade shortages and competition for talent, particularly from data center and infrastructure projects.

Wage growth of 1% to 6% a year is expected to continue, making labor the clearest upward pressure on input costs through 2027. JLL's 2026 survey of Projects and Development Services (PDS) markets found that 64% report shortages of skilled labor, compared with 48% for unskilled labor. Most markets report that shortages of electricians (64%), carpenters (64%) and plumbers and HVAC technicians (58%) are directly affecting project costs. Data centers and advanced manufacturing draw on the same scarce mechanical, electrical and plumbing (MEP) technicians, so wage premiums are set to persist and widen.

Construction costs and drivers vary by sector, reflecting build typology, methods and materials. Globally, offices (shell and core) average between $2,600 and $3,410 per square meter, from standard specification to more complex, higher-technical builds. Commercial construction, including offices and retail, reflects complex specification and coordination in built-up urban locations and high occupier expectations for premium space. High-rise residential sits at a broadly similar level, ranging between $2,280 and $3,710 per square meter globally.

Industrial and logistics construction is markedly less expensive, reflecting simpler, typically low-rise builds in out-of-town locations. Global averages range between $980 and $1,520 per square meter, from simple methods and materials to higher specification for warehouse operational and technology systems. All figures are in US dollars.

Before 2020, annual cost escalation of 2% to 3% was the norm, supported by predictable material prices, interest rates below 2%, stable labor supply and feasibility models built on five- to ten-year horizons with linear cost growth and standard developer margins. That old normal no longer applies.

Over the next three to five years, annual escalation of 3% to 6% is expected to be the new baseline, as material prices swing by 20% to 40% in either direction, interest rates globally can sit at 3% to 5% and labor faces structural shortages and wage premiums. Feasibility models now require continuous evaluation rather than a single assessment. Cost trajectories are non-linear, developer margins may be compressed and value growth is increasingly sector-dependent.

Building flexibility and agility into project and cost plans, alongside early planning, is now a critical part of procurement and delivery strategies.

Higher costs have not stalled capital deployment, but they have changed how organizations approach capital planning and return on investment (ROI). Three responses have emerged: investing in premium assets, where quality differentiation justifies the premium; broadening the value lens to full lifecycle returns; and strategic renovation programs that balance cost escalation against new-build expense. All three reflect a shift from waiting for pressures to ease toward building the capability to operate within them.

For occupiers, this means integrating cost intelligence into feasibility, risk-based procurement on volatile packages, accelerating priority projects ahead of forecast 2027 escalations and engaging partners with a proven record managing volatility.

For investors, it means reviewing pipelines against current cost benchmarks, deploying procurement to secure volume pricing, applying stress-tested feasibility gates, using partnership-focused procurement to shorten request for proposal (RFP) timelines and building continuous cost monitoring into delivery models.

Strategic actions for occupiers

• Integrate cost intelligence into early feasibility. Engage cost consultants at the business case stage, using current benchmarks and escalation rates to validate budgets before site selection or lease commitment.
• Adopt risk-based procurement. Identify high-volatility packages such as structure and MEP, which typically account for the majority of construction cost. Lock pricing early through fixed-price contracts or direct procurement.
• Optimize capital planning timeframes. Accelerate priority projects ahead of forecast 2027 escalations. Build contingencies based on market-specific TPI forecasts.
   

Strategic actions for investors

• Review pipelines with current cost benchmarks. Reassess pre-2024 projects using 2026 market data, validating ROI against current rental and capital value trajectories.
• Deploy strategic procurement across the portfolio. Aggregate demand across projects to secure volume pricing and contractor capacity, with preferred suppliers for critical materials.
• Align capital deployment with cost-value dynamics. Apply rigorous, stress-tested feasibility gates and build cost management expertise into delivery models.
   

Construction cost management in 2027 is expected to be about building the capability to operate within volatility rather than waiting it out. Organizations that build it into how they plan, procure and deliver will be best placed to protect viability and returns.

Download the full Global Construction Costs Index 2026 report for detailed insights, benchmarks and methodology.