JLL’s latest U.S. Construction Perspective 2027 report highlights a split reality for the building industry: real construction spending is on track to decline for a second consecutive year in 2026, even as it becomes more expensive to get projects out of the ground. Tender prices, reflecting what contractors expect to be paid, are projected to rise another 3.1% to 4.2% in 2027, slower than recent surges but still above the pre-2020 norm of 2% to 3% annually.
The report notes that costs are running ahead of historical trends and that pricing pressure is increasingly shaped by local dynamics rather than national averages. JLL Research Manager Andrew Volz cautions that assuming a single national escalation rate for 2027 budgets is especially risky, given how conditions diverge from market to market even when regional averages appear similar.
Despite an overall market pullback, certain asset types are sustaining intense demand for specialized trades. Data centers and civil infrastructure are offsetting declines elsewhere, keeping mechanical, electrical and plumbing contractors in high demand. According to the report, MEP work represents 50% to 58% of total data center construction costs, compared with just 28% to 32% for typical commercial buildings, magnifying the impact of labor and materials constraints in this segment.
Volz notes that roughly 77% of North American data center capacity now under construction is located in frontier markets that had minimal capacity a decade ago, forcing developers to import skilled trades from nearby metros. He cites Central Texas, where growth is extending from Austin’s core into Caldwell County and along Interstate 35, and the Atlanta region, where operators are pursuing sites outside the traditional metro footprint. With many contractors carrying sizable data center backlogs, owners should expect fewer, higher bids for MEP scopes as firms become more selective.
The South stands out as a region with strong underlying growth but relatively modest forecast escalation. Many of the largest projects there are constrained by power availability, with utility delivery timelines acting as a primary bottleneck in markets such as Austin-San Antonio. Volz says the impact is surfacing first as longer project schedules rather than outright cost spikes. Even so, JLL projects that real non-residential workload in the South will expand 11.5% from 2025 to 2028, versus just 2.4% growth in the region’s non-residential construction workforce, implying that the busiest markets could ultimately price above regional averages.
Materials are another key pressure point. The report states that material prices have been rising faster than bid prices since mid-2025, with metals driving much of the gap. By the third quarter, the spread between material inflation and bid-price growth was about five percentage points. In September, steel mill products were up 27.6% year-over-year and copper shapes were up 30%. Trade policies are placing a floor under metals and equipment pricing, while energy costs linked to conflict in the Middle East are increasing the embedded cost of imported materials. Contractors, in turn, are building this uncertainty into bids as a risk premium.
Because bid prices typically lag input cost changes by three to six months, JLL expects early-2027 bids to capture material price increases through late 2026. Volz observes that contractors with strong backlogs are likely to close the gap between materials and bid pricing sooner, while tighter bank lending for construction may slow how quickly higher costs filter through to the broader market.
For owners, the core issue is not just that costs are rising, but how that escalation is expressed contractually. Volz advises that parties clarify who bears the risk of price increases, lead-time volatility and labor shortages before signing agreements, as owners are often assuming more of that exposure by default. He also recommends that owners and contractors define how price moves in key items such as steel, copper and electrical equipment will be shared, and that teams prioritize locking in long-lead electrical gear early in the project lifecycle. At the same time, growing municipal and statewide scrutiny of data centers may influence where future development waves land, adding another layer of location-specific risk for large-scale projects.
