DALLAS, TX — Industry, economic and political headwinds are expected to accelerate construction cost increases during the second half of 2026, according to The Beck Group’s newly released biannual Construction Cost Report.

Beck has updated its construction escalation outlook to 4.1%-4.6%, narrowing the range projected earlier this year. While construction costs have remained relatively stable, the firm expects escalation to accelerate through the end of 2026.

The outlook assumes no major energy or wage shocks, relatively stable construction material prices, no significant policy changes, tighter US monetary policy and a steady labor market.

“Today’s construction market looks different,” said Beck CEO Fred Perpall. “Investment is accelerating in some sectors, as owners and others are being much more deliberate about where and how they deploy capital. That makes timely cost intelligence even more important. Our role is to help clients recognize those pressures early and evaluate their options—whether that means building new or reinvesting in an existing asset.”

Data Center Construction Drives Demand for Trades and Building Systems

Input costs for key materials such as aluminum, steel and copper remain an important consideration for nonresidential projects. Tariffs on certain materials, energy volatility and continued labor constraints are contributing to uncertainty around project costs.

Data center construction remains the strongest sector, driven by significant investment in AI and cloud-computing infrastructure. That activity is increasing demand for skilled trades, materials and building systems shared across the construction industry.

Electricians and mechanical trades, along with equipment such as transformers and other critical systems, are also needed for healthcare, hospitality, office, multifamily and other projects. Competition for those resources can sustain cost pressure even as construction activity moderates in other areas of the market.

Tariffs, Energy and Financing Costs Add to Market Uncertainty

Ongoing industry headwinds continue to limit growth in some sectors of the built environment.

Energy volatility, tariffs, persistent inflation and higher borrowing costs for project financing continue to affect industry performance. Construction activity also remains uneven across sectors, with significant investment concentrated in data centers while activity in other areas of the market has softened.

These conditions are creating a market in which owners and developers must account for both direct material costs and competition for labor and building-system components when evaluating project budgets and schedules.

Existing Buildings Become an Alternative to New Construction

Against this backdrop, Beck sees owners and developers taking a closer look at existing assets as an alternative to building new.

The report’s Design Insights feature, “The New Rules of Reinvestment,” examines five questions owners should consider before committing capital to an aging building: physical feasibility, market demand, capital strategy, building readiness and competitive positioning.

Office-to-residential conversions are one example of that shift. Beck is currently converting Denver Energy Center Tower 2 from a 29-story office building into 386 residential units. The firm also has seen interest in conversions and reinvestment opportunities in other markets.

New Conversion Metric Helps Benchmark Multifamily Projects

To reflect the growing interest in building conversions, this edition of the Cost Report includes a new conversion cost metric within the multifamily category.

The additional benchmark gives owners another data point when evaluating the costs of adapting existing buildings for new uses alongside the costs and requirements of new construction.

For contractors, these projects can also create different scopes and cost considerations than ground-up construction, particularly when existing building conditions affect mechanical, electrical, plumbing and other building systems.

Updated Report Tracks Labor, Materials and Market Conditions

The latest report provides updated cost data across Beck’s markets and building types while examining the labor, materials, energy and other market conditions influencing construction costs.

The report's 4.1%-4.6% annual escalation outlook reflects Beck’s expectation that cost pressures will increase through the remainder of 2026, assuming the economic and market conditions outlined in the report remain in place.

To read the full report visit www.beckgroup.com/beck-think/2026-construction-cost-report-edition-2.