Commercial Construction Costs, 2026 Heading Into 2027
Paul Williams, Chief Financial Officer, The Church of Eleven22
This is an update to Paul's 2026 Church Real Estate Outlook, published earlier this year.
Construction inflation cooled after the post-pandemic surge, but it has not reversed, and in 2026 it has reaccelerated.
Turner Construction's second-quarter 2026 Building Cost Index increased 1.44% quarter over quarter and 5.15% from a year earlier.[1] Mortenson's third-quarter 2026 report, reflecting second-quarter market activity, showed national nonresidential costs up 5.60% over the prior twelve months; materials were up 6.0% and trade-partner work was up 5.2%.[2]
Turner identifies the availability of skilled mechanical and electrical labor as the industry's biggest challenge.[1] JLL reports construction employment growth of only 0.6% in 2026 versus a 2.7% historical average, with 61% of U.S. metro markets labor-supply constrained today and an estimated 72% by 2027.[3]
Data centers, semiconductors, advanced manufacturing and mission-critical facilities are competing for electricians, specialized trades, steel, metals and equipment. Turner specifically notes strong demand in the Midwest and Southeast, and Mortenson names mega-project investment as the strongest source of upward cost pressure.[1][2]
Tariffs, elevated energy costs and geopolitical disruption continue to create pricing and sourcing uncertainty.[2][3] The pressure is concentrated in electrical systems, metals and specialized scopes. It is not uniform across every trade.
AIA's July 2026 forecast describes a K-shaped market. Overall nonresidential spending is forecast to decline 0.3% in 2026 before increasing 3.0% in 2027. Commercial spending looks stronger largely because of data centers; excluding data centers, AIA estimates commercial activity would be down about 1% in 2026 and up only about 1% in 2027.[4]
Owners should not expect broad construction deflation in 2027. The more likely market is one where owners receive aggressive bids on conventional scopes while still facing stubborn escalation in labor, electrical systems, metals, long-lead equipment and specialized trades. Regional conditions will matter more than national averages.
The key owner mistake would be to confuse softer construction volume with falling construction costs.
A project can be bid in a competitive market and still cost more than the same project did twelve months earlier. For projects entering design or preconstruction now, schedule and procurement strategy may be as important as value engineering.
The following ranges are planning assumptions, not published industry forecasts. They are intended as prudent allowances for early-stage capital budgeting and should be replaced by project- and market-specific contractor pricing as design advances.
| Anticipated Bid Timing | Suggested Escalation Allowance |
|---|---|
| Current 2026 pricing | Baseline |
| About 6 months out | +2.5% to +3.5% |
| About 12 months out | +5% to +6% |
| About 18–24 months out | +8% to +12% cumulative |
| MEP-heavy or capacity-constrained market | Potentially higher |
Illustration: On a $30 million construction budget, 6% escalation equals $1.8 million of additional construction cost. That is why timing decisions should be weighed against both financing conditions and likely escalation, rather than the hope of lower bids.
Churches face a particular challenge because capital projects often have long decision, fundraising, design and entitlement cycles. A project discussed today may not reach the market for twelve to twenty-four months. During that period, even moderate annual escalation can materially change the funding requirement.
For these owners, five disciplines matter:
For churches, it is still go time, with caution. Waiting for construction prices to "come back down" is no longer a compelling real estate strategy. Plan for continued moderate escalation, procure intelligently, preserve competition, and move when ministry need, capital structure and organizational readiness are aligned.
Weakness in parts of conventional commercial construction gives prepared owners room to negotiate. The owners who do best in 2027 are likely to be the ones who understand both sides of that market.
Blueprint1122 is made up of church operators who have built and now run more than 500,000 square feet of ministry space across 14 campuses. We keep a database of recent construction costs across our campuses, and we help churches at every phase of a facility project, from strategic planning and site evaluation to design, financing, contractor selection and owner's representation.
If you are planning a project for 2027 and want to pressure-test your budget and timeline, we would welcome that conversation.
Paul Williams, CFO, The Church of Eleven22 and Founder of Blueprint1122
paul.williams@coe22.com
Pastor Shawn Maxwell, COO, The Church of Eleven22
shawn.maxwell@coe22.com
Benjamin Annis, General Manager, Blueprint1122
benjamin.annis@coe22.com
Author's note: The escalation ranges in the "Recommended Planning Assumptions" section are the author's planning recommendations based on the cited market data. They are not forecasts published by Turner, Mortenson, JLL or AIA. Actual costs vary by geography, project type, procurement method, labor market, design and schedule.
Paul Williams serves as the Chief Financial Officer of The Church of Eleven22, bringing over 30 years of experience in real estate investment banking and investment. Before joining the church, Paul held leadership roles at Bank of America Merrill Lynch, served as Chief Investment Officer for a $6 billion real estate investment trust and was Managing Director and Head of U.S. Real Estate at PricewaterhouseCoopers. Over his career, he has been involved in the buying, selling and development of more than $20 billion in commercial real estate.
Paul’s academic background reflects his diverse expertise. He studied accounting at the University of Florida and executive leadership at the Wharton School of Business. His passion for both finance and ministry led him to earn a degree in theology from Princeton Theological Seminary.
With a heart for stewardship and kingdom impact, Paul uses his extensive financial and investment experience to support the mission of The Church of Eleven22. His leadership helps ensure that the church’s resources are managed wisely, furthering its vision to reach one more for the gospel.