REGIONAL OVERVIEW
North America
NORTH AMERICA
Capitalising on tech and AI growth despite economic softening
At a time of global uncertainty and disruption, North America, and particularly the United States, is showing overall economic resilience, allowing for growth and opportunity in the construction sector.
However, the USA and Canada are very uneven in terms of sector demand, with outsized gains in some sectors like data centres and utilities masking sluggish growth in some traditional commercial sectors. Significant investment in world-leading technology and AI innovation continues to support the overall economic picture, but in other parts of the market, weaknesses are softening construction demand.
BREAKDOWN DATA
TOP PERFORMING SECTORS
Industrial and logistics
Data centres
Transport and mobility (Road, rail, airport and ports)
Cost escalation continuing, but slowing
Average build costs continue to rise across both the United States and Canada, which remain at the upper end of our global ranking, with New York City (US$738.0 per ft²) and San Francisco (US$733.0 per ft²) topping the list. Hot sectors like semiconductor manufacturing and data centres are attracting interest from contractors and new waves of investment, even as wider capacity constraints persist.
The US construction market’s resilience is also bolstered by continuing strong demand in secondary markets like Dallas (US$386.0 per ft²), Austin (US$391.0 per ft²) and Charlotte (US$417.0 per ft²). Activity is being driven by work in a range of sectors, but data centres continue to lead the pack. This is contributing to rising cost escalation in 2026, as high as 5.0% in Denver.
In the United States, short-term reactions to tariffs in 2025 did drive up costs, but did not alter the structural foundations of the wider economy. However, weak consumer spending and slowing job growth are fuelling fears of an economic slowdown, meaning contractors are competing to fill up their order books now. That is dampening pricing power and reducing cost pressure.
This is not preventing construction costs from climbing at an average 3.8% in the United States and 2.3% in Canada. Those rises reflect the challenges of tight labour supply and the pricing in of global volatility. Developers should be working closely with the supply chain to understand how uncertainty is impacting them, and to be able to prepare for cost and capacity bottlenecks approaching down the line.
Emphasis on building home-grown capacity
- In recent years, the US political agenda has focused on tariffs to encourage reshoring, with construction looking inwards at opportunities to strengthen domestic manufacturing. This has helped to maintain strong industrial & logistics demand – the top performing North American sector in our survey.
- Despite some volatility and mixed political messages, North American capability and supply chain mobility continues to be bolstered by the Canada-United States-Mexico free trade area (CUSMA), which is expected to continue until at least 2036.
- Canadian Prime Minister Mark Carney has launched the Buy Canadian Policy, which prioritises domestic materials, technology and labour on public housing, infrastructure and defence projects. In the short term this could worsen the issues with already stretched capacity, but may spur more investment in long-term expansion.
- Construction cost inflation is rising at 1.0 percent in Toronto and 2.0% in Vancouver, which is relatively low at a global level. Recent weakness in the industrial sector is keeping cost pressures in check despite rising demand from major programmes.
- The government is looking to redirect more investment from Canada’s major pension funds back into domestic construction – and the government has announced its first sovereign wealth fund, the Canada Strong Fund to help meet this demand for credit.
Mega-project demand requires innovative productivity solutions
Major programmes in particular are driving the need for new solutions to improve construction capacity in North America, where skilled labour shortages are the top challenge reported in our survey. A growing number of clients are regaining the confidence to move forward with larger programmes, especially in the United States. Schemes like the Ford Michigan Central Campus have reshaped capacity in local construction markets, requiring supporting housing and infrastructure alongside an influx of skilled trades.
At a sector level, semiconductor facilities and hyperscale data centres are also putting pressure on construction costs in hotspot markets like Atlanta (US$410.0 per ft²) and Phoenix (US$363.0 per ft²), where prices are rising at 4.0% and 3.5% respectively.
To meet this high demand, the construction industry in the United States is looking for AI-driven capacity improvements that go beyond simple automation, to make genuine improvements to efficiency. 73.0% of survey respondents think AI capability is becoming more important in tenders and discussions, particularly with financial services clients who expect projects to be delivered more cost-effectively. We expect the rising demands on the sector to drive exponential advancement in the development and use of AI – improving programme outcomes.
Persistent labour issues
Labour availability is also a growing constraint across North America. Specialist mechanical, engineering and plumbing (MEP) trades are being drawn towards higher-growth sectors such as industrial and logistics, data centres and advanced manufacturing, tightening capacity for commercial occupier projects. In this environment, early engagement with supply chains will be critical to secure skills and manage pricing risk.
Canada faces particular challenges in terms of the availability of skilled, unionised labour, especially for large infrastructure and government projects. Workforce issues are being further intensified by the ageing labour pool and limited transferability from residential to complex sectors.
Canada’s geographic scale also creates significant logistics and mobilisation issues that go beyond labour mobility. Projects often require building supporting infrastructure or even whole communities to enable delivery. This underlines the transformational nature of large programmes, which are often creating entire, new local economies.
Key takeaways
US construction remains resilient, active and broadly positive, with demand underpinned by growth sectors. Cost increases are relatively contained, with major cities still the most expensive.
Canada’s construction market is stable but slower-growing. Both markets are constrained by labour, financing and structural factors, but are also undergoing shifts toward:
- Domestic self-reliance
- New procurement models
- Major, infrastructure-led growth sectors
AUTHOR
Nic Horn, Real Estate Lead, North America
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