Construction escalation remains on an upward trajectory but is becoming more manageable and less volatile. Factors informing our escalation forecasts are:

• Current activity – prolonged softening across several sectors and provinces.
• Leading indicators – bright spots exist, yet workloads are likely to weaken.
• Materials cost and availability – cost reductions evident across many items and lead-in times are easing.
• Workforce – people pressures are alleviating, although shortages persist and wages continue to rise.
• Machinery and equipment – steady transition to lower growth, but shortages and escalation risks persist.

Taking into account the above, our 2024 escalation estimate has increased slightly from 2.5 percent to 3.0 percent. Early 2024 activity has been positive, yet muted client demand is bringing more competition to the bidding process which should allow lower materials costs to feed through to clients more readily.

2025 should see a better market to operate in, as demand recovers following a fallow 2024. Legacy labour constraints and increased workloads could see a mismatch in supply and demand, and price growth may exceed 2024 levels, rising by 3.5 percent.

Our three-year escalation forecast now extends from 2024 to 2026. With forecasting accuracy weakening over time, long-term forecasts typically align with historical rates to minimize errors. This value is close to 4.0 percent, and that is the level of our 2026 forecast. Input cost pressures and delivery bottlenecks should ease, and interest rates and inflation levels subside, spurring demand growth.