How will construction markets evolve in 2026 as policy impacts fully materialize? JLL’s 2026 U.S. Construction Perspective builds on our analysis of CRE stakeholders navigating policy-driven market changes, examining how organizations can position themselves strategically as uncertainty gives way to measurable impacts.

Policy volatility is still reshaping construction economics, introducing new risks and opportunities that are increasingly central to development decisions. While the full impact of policy shifts is unfolding, uncertainty has already influenced project costs, timelines and market strategies across regions. Trade policy instability, immigration enforcement and the interactions of these threads with local markets played an outsized role, causing delays and holds, the effects of which will be felt for some time yet.

Uncertainty paralysis defined much of 2025, leaving the market with a difficult path ahead in 2026, but directional clarity around key policy trajectories now allows for strategic positioning for the year ahead. Notably, 2026 will be a year of deepening divisions as in-demand sectors and markets see activity return and others continue to search for footing. Cost impacts from policy will increasingly materialize while opportunities reshuffle geographically and sector. This report provides foundational insights for organizations ready to move toward strategic advantage capture.

Cost pressures from policy shifts will grow
Cost increases have been moderated by uncertainty and limited demand. However, more of the trade-policy-related growth will materialize over the course of 2026, on top of naturally occurring increases.

While the total impact of trade policy will continue to fluctuate, cost growth from it is unlikely to be wholly offset by monetary policy or other interventions.

Labor’s structural shortages amplify
Construction labor force growth has long been constrained by a combination of factors, including an aging workforce and persistently low entry into trades. Existing regional and project-level challenges are being magnified by increasingly aggressive immigration enforcement. Regional resilience to labor disruptions is varied and critical.

Integrated, local strategies are essential
Success in 2026 will hinge on adopting new approaches to project delivery, risk assessment and supply chain management to account for rapidly evolving local realities. Early contractor engagement, dynamic risk-sharing and location-specific procurement are becoming standard tools for mitigating emerging challenges.

Policy impacts are disrupting the construction industry by sector as well as region. Despite overall construction spending declining 4.7% in 2025 in real value, data centers, utilities and infrastructure demonstrated remarkable resilience and growth. Fundamentals remain robust enough to absorb higher construction costs, generating strategic opportunities for organizations directly connected to these sectors or able to capture the tailwinds.

Creative and adaptive projects are moving despite changing and uncertain conditions. For example, office-to-residential conversions nearly doubled in 2025, demonstrating how format flexibility and vision enable operators to capitalize on fundamental needs.

Material prices in 2025, including all sources of growth, averaged 4.2% above 2024 prices. This is below the anticipated increases attributable to tariffs in the long run, which may range from 5% to 25% depending on the material, with an aggregate increase of around 8% estimated at current policy levels.

The slow pace of increase is expected: uncertainty about tariffs created incentives for measured responses, stockpiles of goods afforded some flexibility and limited demand delayed impacts on bid prices. However, should tariffs remain in place and demand for construction increase, more costs will have to pass through. The estimates represent an upper bound on prices from policies as of the fourth quarter of 2025; further changes in tariff rates will alter the total impact to costs and timeline.

Aggressive immigration enforcement has created immediate disruptions in major markets that will have lasting negative effects on industry capacity. Currently, workforce-related disruptions are partially masked by limited activity but will be acutely noticeable when demand accelerates. Organizations planning for future growth must account for these constraints, as current market challenges will hamper the employment pipeline in addition to the aging workforce and ongoing immigration conflict.

Labor represents one component within a broader landscape requiring a holistic analysis. Immigration enforcement interacts with federal infrastructure investment patterns, local fiscal capacity and regional economic conditions to create competitive positioning that varies across markets.

Interest rate reductions, while a positive driver for the industry, do not change the underlying material price escalation or labor challenges caused by trade and immigration policies. Trade impacts will persist even during accommodative rate environments and, given the anticipated magnitude of interest rate cuts, will result in a net cost increase. Cost pressures from the limited labor supply will further cement the direction of change as uniformly up.

Managing cost impacts will require operational adaptation regardless of the financing environment, making strategic timing and procurement decisions more critical and a better choice than waiting on macroeconomic policy changes.

Variable policy implementation and exposure make for diverging regional impacts. Sweeping national policies reshape opportunities for investment across regions, while local structures redefine capacity to deliver on the opportunities.

The diversity of impacts across regions is a core feature of today’s environment, and as evidenced by the extensive construction spending growth in highly exposed markets, exposure isn’t an insurmountable obstacle. All markets maintain development potential when project type, timing and execution strategy align with local conditions. Success increasingly depends on detailed local engagement to understand the intersection of risks and positioning for each market and project.

The direction of macro-level cost drivers is clear
Trade and labor cost impacts will compound faster and greater than anticipated interest rate relief. Although local impacts will not be uniform, the net impact and critical interactions are better defined. Importantly, the likely outcomes do not favor continued waiting for policy-based cost relief.

Trajectories differ between markets
Policy impact varies across the U.S. Some regions will maintain a robust labor force while others will need to address accelerating constraints. Import reliance, local production, and existing pipelines are simultaneously making material costs a more local and complex issue.

Local and holistic uncertainty management
Success in 2026 will be about big-picture approaches that recognize the nuanced interactions happening at a local level. High-exposure markets are still viable for projects matched to local conditions, and diverse project types offer opportunities across a highly varied policy landscape.