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JLL Says Construction Costs Will Keep Climbing 3% to 6% a Year Through 2027

JLL Says Construction Costs Will Keep Climbing 3% to 6% a Year Through 2027

The era of predictable, cheap building is gone, and the new math reshapes every pro forma.

Nina Dale
October 20, 2026

In partnership with

Good morning. The days of pricing a project once and trusting the number are over. JLL now says building costs will climb 3% to 6% a year, roughly double the pre-2020 norm.

🎙️ This Week on No Cap: Two multifamily operators on turnover costs, affordability, and whether this is a bubble.

CRE Trivia 🧠

What everyday vegetable became the center of a massive market manipulation scandal in the 1950s, leading Congress to ban its futures trading in 1958?

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Market Snapshot

S&P 500

GSPC

7,690.73

Pct Chg:
+0.41%

FTSE NAREIT

FNER

797.30

Pct Chg:
-1.16%

10Y Treasury

TNX

5.144%

Pct Chg:
+0.008%

CME Term SOFR

1-Month

3.93%

Pct Chg:
-0.00

*Data as of 10/19/2026 market close.

Development

Building Costs Settle Into a Pricier New Normal

Predictable, cheap construction is gone for good, JLL says, and a 3% to 6% annual cost climb is now the baseline developers must plan around.

By the numbers: The forecast is blunt. JLL's 2026 Global Construction Costs Index projects worldwide costs rising 3.1% to 4.2% in 2027, after a 3.5% to 4.7% climb this year, and the firm now treats a 3% to 6% annual increase as the baseline to plan around, against a 2% to 3% norm before 2020.

Five years of inflation: Costs have already run 25% to 30% higher worldwide over the past five years, and up to 40% in some markets. The swings are not done. JLL expects material prices to move 20% to 40% in either direction over the next three to five years.

Labor sets the pace: Payroll is the clearest pressure. Pay for construction workers is up 8% to 35% since 2020, and 1% to 6% a year more recently, while 64% of the markets in JLL's survey report skilled-labor shortages against 48% for unskilled.

The regional split: Geography decides the number. North American costs are forecast to climb 3.2% to 4.2% in 2027, driven by materials, US trade policy and labor, while Asia Pacific leads at 3.8% to 4.7%, the Middle East runs 3.4% to 5.4% and Europe trails at 2.2% to 3.5%.

Trades in demand: Electricians are the bottleneck. Data centers and advanced manufacturing keep bidding for the same mechanical and electrical workers, so JLL expects wage premiums to stick, with electrician and carpenter shortages each reaching 64% of markets and plumbers and HVAC technicians close behind at 58%.

Not all space is equal: Build costs split by use. Shell-and-core offices now run $2,600 to $3,410 per square meter and high-rise residential $2,280 to $3,710, while industrial and logistics stay far cheaper at $980 to $1,520, and rising values let industrial and data-center projects absorb the escalation best.

➥ THE TAKEAWAY

What's next: Volatility is the operating condition now, not a phase to wait out. Lock pricing early. JLL tells owners to fix prices on structure and MEP work, re-test pre-2024 pro formas against today's benchmarks, and pull priority projects forward before 2027's increases bite.

A MESSAGE FROM HIGHGATES

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✍️ Editor's Picks

Beyond DIY: New research reveals where CRE’s AI adoption stands—and what firms seeing real ROI are doing differently. (sponsored)
Shrinking wall: Commercial mortgage maturities ease to $875B in 2026 from $957B, but Newmark flags $179B of loans paying coupons far below today's yields.
Quiet cutoff: Months after the 179D energy deduction stopped covering new construction, lenders and advisers tell CPE they see little change in how owners finance retrofits.
Deal flow, automated: Altrio’s new AI agent scans thousands of brokerage listings, matches properties to investor criteria, and streamlines deal screening without added staff or costs.
Fund retreat: Two Sigma halted real estate fundraising and cut senior staff, Bloomberg reports, after drawing under half its $2B target in two years.

🏘️ Multifamily

Rent steadies: US single-family rents rose 2.0% in August, with Chicago leading at 4.9% as Midwest metros outpace a lagging Sun Belt.
BTR opens: HUD opened two FHA multifamily insurance programs to BTR communities, underwriting detached-home rentals on the same terms as apartments.
Church land: Congregations with idle land are teaming with developers on affordable housing, led by a Houston church's $30M, 90-unit senior project.
Coral Gables: Empira landed an $81M construction loan from Pearlmark, for Aurelian, a 160-unit Coral Gables apartment tower due in 2028.
Transit housing: Related Urban arranged $129M for Gallery Lummus Parc, a 257-unit transit-oriented Miami project where more than 80% of units are priced to income.

🏭 Industrial

Vacancy floor: LA County industrial vacancy slipped to 5% in Q3, its first annual drop in two years as tenants absorbed 1.9M SF.
Beyond servers: AI real estate bets now reach past data centers into powered land, inference space and battery storage, with Hines eyeing 40,000 power-ready acres.
Export push: An industry group for Canadian food producers is pitching a West Coast logistics hub to widen export routes, CoStar reports.
Life sciences: King Street Properties landed a $237.7M Starwood refinancing for its 582K SF Research Triangle life-sciences campus near Raleigh, anchored by Novartis.

🏬 Retail

Winding down: Site Centers will pay a $3-per-share dividend and move to delist from the NYSE, capping a $3.7B asset sell-off since spinning off Curbline.
Foot traffic: US mall visits rose across all formats in September, led by open-air centers up 5.6% as indoor malls gained 5.5%.
Sugar crash: The cookie-chain boom is cooling as shoppers pull back, with Placer.ai logging visits to Crumbl's 1,000-plus locations down 32% from a year earlier.
Lahaina focus: Maui's biggest retail sale in decades is drawing fresh attention to Lahaina's slow recovery two years after the wildfire, CoStar reports.

🏢 Office

Owner-user buy: Audio-Technica bought an 8,966 SF creative-office building on Hollywood's Melrose Avenue for its LA base, the strip's first office purchase of 2026.
Tight supply: Limited new deliveries are firming Fort Lauderdale's office market, where CBRE logged asking rents up 8.3% and only one project underway.
Backfill win: A renovated Phoenix office tower landed a major tenant, a rare bright spot where Kidder Mathews pegs Class A vacancy above 28%.
Stake sale: BXP sold a 10.6% stake in its planned $2B, 930K SF tower at 343 Madison Avenue to AVRS Partners, now 56% pre-leased.

🏨 Hospitality

Waikiki default: A $302M CMBS loan on Honolulu's 1,230-key Hyatt Regency Waikiki Beach went to special servicing after a maturity default.
Budget slopes: Value-seeking skiers are finding $26 lift tickets and thin crowds in the Republic of Georgia, as marquee resorts price higher.
Resort refi: Citi provided a $210M refinancing for Trinity's 531-key Grand Hyatt Indian Wells resort, after a 2024 renovation and rebrand.

📈 CHART OF THE DAY

Despite record-high office vacancy rates, the effective vacancy rate for desirable, financially stable properties is just 5% and falling, highlighting a tightening supply of quality office space.

CRE Trivia (Answer)🧠

Onions. In 1955, traders Sam Siegel and Vincent Kosuga manipulated the onion market, making millions while devastating farmers. The scandal prompted Congress to pass the Onion Futures Act in 1958.

JLL Says Construction Costs Will Keep Climbing 3% to 6% a Year Through 2027

The era of predictable, cheap building is gone, and the new math reshapes every pro forma.

CRE Trivia 🧠