The State of Construction Costs in 2026

What’s happening with construction costs? It’s the question I hear more than any other, and for good reason. After few turbulent years, everyone wants to know: are retail construction costs still climbing?

The short answer? No. In fact, for the past two years, we’ve seen prices plateau, gently decline, and come under steady downward pressure from the highs of 2022–23.

The Big Picture

During the COVID years, construction costs surged (some reports suggest increases of 20% to 40%). It was a brutal period that pushed many builders and developers to the brink. While most blame material costs and supply chain disruptions, we believe that’s only part of the story. The real driver? A classic case of supply and demand.

At the height of the pandemic, skilled labour was scarce. Borders were closed, visa holders and international students were absent, and many workers retreated from city life. Yet construction activity was booming. In Sydney alone, three major infrastructure projects – the M8 tunnels, the new Metro from Chatswood to Sydenham, and Western Sydney Airport – were all peaking in manpower demand.

In construction, around 82% of project costs come from trades (incl the materials they install). When subcontractors are busy and labour is tight, their margins rise, sometimes significantly. But when competition increases and subcontractors are chasing work, those margins shrink fast.

At our coalface, we see this shift month by month.  We submit nearly 300 tenders a year, and we’re constantly engaging with subcontractors. When they’re calling us, negotiating, and offering cost-saving solutions, it’s a clear sign: prices are softening. And that’s exactly what we’ve seen over the past two years.

Of course, not all pressures are easing. Wage growth, driven by EBAs and inflation, will offset some of the savings. And while prices are unlikely to ever return to 2021 levels, the dramatic COVID-era spikes are behind us.

So, at a macro level, they have certainly stabilised and there are signs of downward pressure.

What’s real, what’s noise, and what’s next.

To dig deeper into what this means for retail specifically, let’s look at the realities on the ground: where the pressures are, where the opportunities lie, and how our retail focus gives us a clearer lens on costs than the broader market headlines suggest.

Does retail construction ride the same rollercoaster as the rest of the construction market?

Not exactly. Positively, we see retail construction experiencing a more nuanced cycle. Non-discretionary spend tends to insulate deep troughs and our largest retailers understand and leverage this well.  As major infrastructure projects wind down and housing slows, we’re seeing downward pressure in the subcontractor market, and that’s good news for retail construction- especially for those who know where to look for value.

Consistency is our friend.

The advantage of being a retail construction specialist is working with a smaller, more consistent pool of trades. Because retail projects often share similar requirements, there’s a natural repetition in the trades we engage. This consistency allows us to track pricing and market movement more accurately, which in turn helps us deliver greater insights for our clients on each build.

How are the ‘big impact’ trades tracking?

When we look at a typical neighbourhood shopping centre, subcontractors make up 82% of costs. That’s why we manage these trades closely, getting their costs and performance right is key to a successful project.

Some key trends we’re seeing in the market:

-Bulk excavation is still expensive, but prices are easing generally. As always, removal of spoil from sites is more often an expensive exercise.

-Reinforcing steel supply costs have come down quite a bit since 2021 however, a fair portion of this has been offset by increased labour costs.

-Concrete costs are up ~4% due to an energy-intensive production.

-Structural steel has really settled down and costs reflect this.

-Blockwork is labour-intensive and rising ~6% annually.

-Metal roofing peaked in 2023, now back to 2021 levels.

Real World Insights

Our insights come from hundreds of tenders and projects we deliver each year.

Like Hawkeye tracking every serve and volley of the tennis ball in a match, we’re constantly collecting data on pricing and performance. That means we can spot trends months before they show up in industry indexes.

What’s next?

We’re cautiously optimistic. The easing of infrastructure and industrial sector demand is creating opportunities in our subcontractor market, and these are the largest drivers of price fluctuation

All three eastern seaboard states are different. Victoria has the least work volume, and as such pricing is more competitive on all levels. New South Wales is evenly poised, good supply verse demand balance.

Queensland is going to be interesting for the next 5-7 years into the Olympics. It was the most volatile during Covid and trade supply is on everyone’s mind. We are already seeing a big shift towards upfront planning by developers through an ECI process; resulting in a reduction of risk and providing confidence in delivery timelines.

Rob Doust, Managing Director