Global construction costs are settling into a permanently higher baseline, altering real estate capital planning, development feasibility and asset viability across sectors worldwide as demand grows for manufacturing facilities, high-performance offices and data centers.  

According to JLL’s Global Construction Costs Index 2026 report, global pressures on the industry have established a new annual cost escalation baseline between 3% to 6%, above the pre-2020 norm of 2% to 3% as construction costs remain structurally elevated.  

This shift, according to the commercial real estate services and investment management company, establishes a new permanent baseline, as shifting focus to sector value growth and continuous project re-underwriting. 

Data centers in particular are driving some of this shift, JLL found. 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. 

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.   

According to the report, complex interactions between global supply chains, politics, AI-driven demand and a wide array of local factors are generating constant upward pressure on costs, even if the underlying source isn’t the same month-to-month.

As a result, real estate investors, developers and occupiers can no longer rely on static cost assumptions or attempt to wait out the market through project deferrals, according to JLL. 

The report found that after years of economic disruption, material volatility and geopolitical shocks, global construction tender prices are forecast to rise by an additional 3.1% to 4.2% in 2027. Regional forecasts highlight continued upward momentum, led by the Middle East (3.4% to 5.4%), Asia Pacific (3.8% to 4.7%), North America (3.2% to 4.2%) and Europe (2.2% to 3.5%). 

Labor shortages, especially in high-demand skilled trades and the consequentially elevated wage growth continue to push overall construction costs higher. Globally, construction wages jumped 8% to 35% across key markets between 2020 and 2026, consistently outpacing general consumer price inflation. 

Rising costs rewrite sector viability 

The report also emphasizes that elevated construction costs are creating a performance divide across property sectors, as project viability is tied to how well asset value growth can absorb cost escalation. 

Build typology also varies widely in baseline costs across sectors. Commercial developments carry the highest global average costs, while industrial and logistics assets remain less expensive.

Consequently, stronger-performing sectors such as industrial logistics and data centers are absorbing cost increases more effectively because rental growth and capital values have outpaced construction inflation over the past five years. Therefore, sectors experiencing softer value growth face a much tighter viability equation, forcing sponsors to adopt more sophisticated value-creation strategies, according to JLL.

"Construction costs have reset at a higher level, and owners should plan around that rather than wait for relief,” said Cynthia Kantor, the CEO of project and development services at JLL. “The owners who keep delivering returns are the ones who test feasibility against live cost data from day one, re-confirm it at every design and procurement gate and favor retrofit and repositioning where it beats ground-up on cost, speed, and carbon.”