The overall rate of construction escalation has been impacted by several drivers of late, both at a domestic and international setting. Key trends informing our escalation forecasts are:

• Current activity – The US economy is growing steadily and the construction industry reversed its shortfall in Q3 2024. Performance is sluggish overall, though, despite pockets of strong demand.
• Leading indicators – Confidence is building following the election of a business-first president, but the start of 2025 is likely to see muted construction spending due to policy volatility.
• Materials cost and availability – Material costs have stabilized, but recent tariffs on steel and aluminum could drive costs higher.
• Workforce – Wage growth has moderated. Yet, labor shortages persist, particularly in skilled trades, and are exacerbated by potential immigration policy changes.
• Machinery and equipment – High capital costs and elevated interest rates continue to impact the affordability of machinery and equipment, but price pressures are alleviating.

While the data trends above paint a picture of de-escalation as construction demand softens and supply chains continue recalibrating post COVID-19, bid price growth has gathered momentum. What was listed as 3.0 percent in Q4 2024 has now moved up to 4.0 percent in Q1 2025.

A multitude of weather and climate disasters have created isolated hotspots of demand to rebuild and repair affected real estate. The realization of proposed trade and immigration policy measures will weigh heavily on escalation proformas, and geopolitical tensions remain front and center of risk allowances as well. Increases, however, may be tempered by the detrimental short-term impact policy measures could have on the economy and construction activity.

2026 is expected to be calmer, with our bid price forecast unchanged since Q4 2024. A firmer work pipeline should materialize once uncertainty settles, and tariff impacts, if controlled, should pass through the system. Once repealed, downwards pressure on material costs could occur. Labor shortages are likely to persist, though, as it would take time to train and replace talent lost through immigration policies, firmly applying upwards pressure on prices.

Bid price escalation will be intrinsically linked to trade policy, however, and the strength, coverage and duration of potential tariffs will significantly influence escalation. Not just on a direct cost perspective, but also an indirect front. As such, we’re proposing a broader range of outcomes +/-3.0 percentage points around baseline predictions as the construction industry continues to navigate uncertainty.