NEW YORK — US construction cost pressures are increasingly shifting from labor to materials, with construction-related commodity prices rising 13.3% year-over-year (YOY) as tariffs, metals supply constraints and demand from data centers and infrastructure projects push input costs higher, according to Cushman & Wakefield’s latest Construction Insights for Global Occupiers report.

The increase in commodity prices is more than 4.7 times the rate recorded a year earlier. Aluminum led the increases at 40.9%, followed by copper base scrap at 39.3% and nonferrous metals at 38.5%.

At the same time, labor cost growth has moderated, creating a different construction inflation environment from recent years.

“The pressure on construction costs hasn’t disappeared, but its source is changing,” said Tyler Paytas, Global Head of Programs & Projects, Global Occupier Services at Cushman & Wakefield. “Labor remains constrained, particularly in specialized trades, but materials and equipment are increasingly driving escalation. For occupiers planning projects, that means the cost environment can remain challenging even as wage growth moderates.”

Material Price Growth Accelerates Through August

The ENR Building Cost Index increased 4.7% YOY in August, compared with a 1.5% increase in its skilled labor component.

Overall construction materials rose at least 1.0% month over month for three consecutive months through August. Annual material price growth accelerated from 6.5% in June to 8.5% in August, indicating that material inflation is becoming a larger factor in project costs.

For contractors, the shift puts greater emphasis on material estimating, procurement timing and managing exposure to volatile commodity prices.

Electrical Equipment Becomes a Key Cost Pressure

Electrical equipment is emerging as a particular pressure point as demand from grid modernization, renewable energy investment and data center development increases.

Electrical machinery and equipment prices increased 13.0% YOY, while switchgear increased 9.0%. Transformer and switchgear costs are forecast to accelerate further through the end of the year amid continued copper supply constraints.

The combination of high metals costs and strong demand for electrical infrastructure can affect both equipment pricing and project schedules, particularly on large-scale projects with substantial electrical requirements.

Data Centers Sustain Construction Activity

The shift in construction cost pressures is occurring against an increasingly divided construction market, with data centers and infrastructure projects supporting activity while many traditional commercial real estate sectors remain subdued.

Contractors working on data center projects reported an average backlog of 11.0 months, compared with 8.5 months among contractors without data center exposure. Infrastructure construction backlog reached 10.1 months in June, up 7.9% from a year earlier.

Meanwhile, commercial and industrial architectural billings registered 46.7 in June, below the 50 threshold indicating growth. Nine of the past 10 months have registered below 50, signaling continued weakness in the broader nonresidential construction pipeline into 2027.

“Construction is increasingly a story of two markets,” said Ethan Tribble, Senior Research Analyst, Global Research at Cushman & Wakefield. “Data centers, infrastructure and other large projects are generating significant demand for materials, electrical equipment and specialized labor even as pipelines remain much thinner across traditional sectors. That concentration is supporting overall construction activity while putting additional pressure on many of the same inputs occupiers need for their projects.”

Infrastructure Demand Adds to Material Competition

The divergence between active and subdued construction sectors is also contributing to greater volatility in national construction activity.

New construction starts surged 33.5% month over month in May as major healthcare, manufacturing, utilities and data center projects broke ground, before declining 20% in June.

The concentration of major projects means contractors and project owners can face strong competition for the same materials and equipment even when construction activity across other market segments remains weak.

US Cost Escalation Remains Contained for Now

Despite rapidly rising input costs, overall US construction cost growth has remained comparatively contained. Construction costs increased 0.7% from the fourth quarter of 2025, compared with 6.4% in South Korea and 3.9% in Germany.

Greater domestic energy production has helped insulate the US from some of the energy-driven construction cost increases experienced in more import-dependent markets. However, Cushman & Wakefield expects US construction prices to accelerate as higher materials and equipment costs increasingly flow through to project pricing.

Contractor pricing was up an average of 4.3% YOY as of June, including a 6.4% increase in concrete. Metro-level construction costs increased an average of 4.42% YOY during the second quarter, approximately 0.9 percentage points above the national producer price index for nonresidential structures.

Procurement Planning Becomes More Important

“Cost escalation is increasingly concentrated in the materials and systems that are critical to modern construction,” Paytas said. “For occupiers, early procurement, realistic budgeting and understanding where those pressures are most acute will become increasingly important as projects move forward.”

Globally, supply chain pressures have eased from their April peak, but Cushman & Wakefield expects metals and equipment costs to remain elevated amid structural supply constraints.

Infrastructure, energy and data center projects continue to drive construction activity, while development across many traditional commercial real estate sectors remains comparatively subdued.

To read the full report visit www.cushmanwakefield.com/en/united-states/insights/construction-insights.