Construction costs have stopped spiking, but have settled at a higher level and likely won’t return to 2020 levels, according to JLL’s new Global Construction Costs Index 2026.

Annual cost escalation is at 3% to 6%, up from the typical 2% to 3% before 2020. The new reality means waiting to start construction projects is costly, as Tender Price Inflation could add $2 to $3 million to a $50 million project.

With a forecasted further 3.1% to 4.2% increase in global tender prices in 2027, developers and investors must move to continuous evaluation of feasibility models.

Higher costs are rewriting real estate viability across sectors: Asset classes with strong value appreciation, such as industrial facilities and data centers, are successfully absorbing elevated build costs, while office and retail sectors face a more complex return-on-investment calculation.

Labor cost pressures are structural, with demand increasing as supply shrinks and construction wages rising 8% to 35% across markets from 2020 to 2026.

The labor shortage for electricians, plumbers, and HVAC specialists is particularly acute. Rising AI-driven demand for manufacturing facilities, high-performance offices, and data centers is intensifying competition for these specialist skills.