This audio is automatically generated. Please let us know if you have any comments.
Dive brief:
- Construction input prices rose again in the second half of 2025, although some materials fared better than others, according to a webinar by construction cost tracking firm Gordian.
- The increases mark a turnaround after nearly three years of relative stability following a pandemic-era cost spike, and that trend could continue into 2026, according to Gordian.
- Rather than labor costs, which jumped in nominal terms but lagged broader inflation, the increase in input costs came mainly from materials. Inputs such as copper and electrical components, key to data center construction, posted the biggest gains.
Diving knowledge:
Contractors are bracing for a possible return of material cost pressures in 2026.
Non-residential input prices have increased by 44.5% since the start of the pandemic in 2020, according to the latest producer price index data. Most of these increases, however, occurred in the first two years. Since then, the appreciation of input prices has largely stabilized.
“This increase in material costs going back to 2025 was very real and strong enough to pull the inflation-adjusted historical cost index out of a multi-year decline,” Sam Giffin, Gordian’s chief product officer, said during the webinar. “This is unfortunate for many in the industry. Now, let’s move forward again.”
Copper and electrical components were the main accelerators of the year-end cost push. These inputs play an outsized role in energy-consuming projects, including data centers, where demand is still booming despite a general softening of the construction market.
“Copper is one of the few benchmark materials where the cost borne by construction industry stakeholders is typically shaped by demand factors outside of it,” Giffin said. “We have continued electrification of equipment and facilities across the country, plus a huge increase in the growth of data centers and all the surrounding power grids. It’s causing a massive increase in demand for copper.”
Analysts believe these higher prices are likely to persist as supply constraints add to demand pressure. China, for example, consumes about half of the world’s copper supply, Giffin said. If this continues to weigh on the market as mining productivity struggles to keep pace, expect copper prices to continue their upward trajectory.
“Remember, it takes an average of 17 years for a new copper mine to go from discovery to active production,” Giffin said. “So if that external demand doesn’t abate and our productivity and supplies don’t increase faster, it’s likely that copper prices will continue to rise even more than they are.”
Beyond raw copper, cost increases are spreading to other electrical and mechanical components.
Giffin pointed to copper wire as one of the clearest examples. Long delivery times for major equipment that have copper components, including transformers and coolers, have intensified price appreciation.
“There are other categories that are starting to show that pressure,” Giffin said. “They are bucking the trend of previous years by raising the price in the first quarter.”
Steel prices, on the other hand, posted more of a “mixed bag,” Giffin added. That’s largely due to what analysts refer to as “supply-side discipline,” he said.
“With reduced demand and reduced import volumes, the market is stable,” Giffin said. “The lack of expansion could indicate some stagnation on the horizon.”
Concrete and masonry, on the other hand, show a different pattern. Demand is tight, but prices for certain inputs are at their highest nominal levels since the peak of the pandemic.
“In categories like ready-mixed concrete and concrete block, our prices are high relative to previous years,” Giffin said. “Given market trends limiting demand for concrete cement, it appears likely that prices for these material categories will remain limited through most of 2026.”
