What do current market conditions mean for our escalation forecasts?

Construction escalation is trending upwards as continued conflict in the Middle East layers on top of existing trade tensions. Factors informing our escalation forecasts are:

• Economy – GDP rose in Q2 2026 despite ongoing trade uncertainty and geopolitical tensions. Albeit growth is likely to remain subdued in the near term, with a gradual recovery over the forecast horizon.
• Construction – activity picked up although the outlook remains mixed across segments. Public infrastructure spending will continue to provide workload stability across the country.
• Input costs – pressures are rising quickly, driven by higher energy costs and US-CA tariffs. Easing will be dependent on the de-escalation of the Iran conflict and trade policy certainty.

National bid price escalation is now forecast to increase by 3.0% in 2026, up from the 2.75% in our Q2 2026 report. The revision reflects continued supply-side risks rather than a meaningful change in construction demand. Rising energy prices and supply chain disruption stemming from the Middle East conflict, on top of renewed tariffs between Canada and the US, have intensified cost pressures. And while competitive tendering may be moderate in some markets, contractors are increasingly reassessing contingencies and risk allowances as procurement and input cost uncertainty grows.

In 2027, however, our escalation forecast has been revised down from 4.0% to 3.75%. While infrastructure and institutional pipelines remain substantial, and tariff-linked cost impacts grow, expectations for construction activity have softened as geopolitical uncertainty weighs on project viability and investment decisions. Many of the nation-building initiatives have yet to fully translate into active construction workloads, suggesting a slower turnaround from policy intent to groundbreaking than previously anticipated. Resultingly, competitive bidding may persist for longer, tempering escalation despite ongoing labour market pressures.

For 2028, our forecast has been reduced again from 4.5% to 4.0%. The broader direction of travel remains unchanged, with public-sector spending and an eventual residential recovery expected to support construction demand. Although like 2027, at a more measured pace as softer-than-expected demand conditions partially offset rising construction input costs.

Please note that bid price variability will continue over the forecast horizon, and deviations from our national average will emerge on a project-by-project basis. With that, we’re proposing a range of escalation outcomes +/-2.0 percentage points around baseline predictions as uncertainty persists.

Our 2026 provincial escalation forecasts are increasingly varied by region, reflecting differences in project pipelines, labour availability and overall market conditions. The figures are visualized below, with additional context available in each of the provinces’ respective commentaries.