➤ Key Highlights
Construction input costs rose 3.5% YoY, driven by concrete, electrical components, and mixed steel pricing.
Labor remains the stickiest inflation driver, with wage growth 4.1– 4.3% across key trades.
Economy wide ECI shows 3.6% YoY wage pressure construction continues to run hotter.
Steel volatility has cooled, but pricing remains uneven across mills and product categories.
Execution risk is shifting: schedules are now more sensitive to labor availability than material swings.
The construction cost environment is stabilizing at a higher floor: material inflation has eased, but labor driven pressure is now the primary force shaping real project budgets heading into 2026.
Developers and GCs relying on “materials deflation” to rescue pro formas are reading the wrong signal. The cost curve is no longer defined by commodity volatility it’s defined by workforce scarcity, sustained wage escalation, and schedule compression risk.
This shifts the entire preconstruction strategy: labor planning, subcontractor capacity, and escalation language now matter more than chasing spot market steel pricing.
⏭️ WHAT’S NEXT
Expect labor indexed contracts (ECI/PAS tied) to become standard for multi-year projects.
Material costs remain range-bound, but no meaningful relief is likely without a broader economic slowdown.
Competitive trades will harden bid spreads as contractors protect margins against wage uncertainty.
Schedules will see more built-in float and contingency premiums, especially for MEP scopes.
➤ TAKEAWAY
The era of material-driven volatility is fading; labor is now the dominant inflation engine.
Project feasibility in 2026 won’t be determined by steel or concrete it will be determined by whether teams lock labor early, structure escalation correctly, and manage schedule risk with institutional discipline.
