Chicago construction cost and market overview 2026

Chicago’s construction market overview  

Our Chicago market data indicates negative year-over-year growth on average. This is a result of multiple factors, including economic uncertainty stemming from tariff policy, the elevated cost of capital, and a highly competitive construction market.

At a macro level, public spending and the data center boom have contributed to overall industry increases. However, in private sector corporate offices, we’ve seen a decline.

Labor availability has remained consistent, but mechanical and electrical trades have seen strains due to demand from data centers. Despite increases in material and union labor costs, we expect bid prices to remain flat in Q1 and Q2 of 2026. This is due to a limited opportunity pipeline and intense competition in the market.

Top three market challenges 

The top three challenges and considerations for construction in Chicago are:  

1. Leasing has rebounded, but construction is lagging 

Leasing activity in Chicago’s CBD accelerated in late 2024, with total volume reaching 171,000 sq m (1.84M sq ft) in Q4, driven primarily by a surge in deals under 2,320 sq m (25,000 sq ft). That momentum continued into early 2025, as Q1 recorded 209 transactions totaling 155,000 sq m (1.67M sq ft), reflecting renewed tenant engagement.

But the construction pipeline hasn’t followed suit, most likely because these smaller deals require limited fit-outs. This dynamic is sharpened by the continued loss of true first-generation, trophy-quality space, narrowing the supply of top-tier options even as broader availability expands.

2. Project size distribution shift 

Year-over-year data highlights a pronounced shift in project size distribution within the Chicago office market, driven by the continued decline of large-scale office projects and a growing concentration in smaller footprints.

Projects over 4,650 sq m (50,000 sq ft) have dropped sharply, from 38.0% in 2020 to just 15.0% in 2025, reflecting the scarcity of highly sought-after office real estate and a market increasingly shaped by hybrid work strategies.

3. Tariffs challenge cost and timeline confidence 

The 2025 tariff environment, marked by steep increases in steel and copper, puts measurable pressure on Chicago construction projects. Contractors report that most steel-related impacts are now priced in, though metal-material volatility continues.

Our Chicago Construction sentiment survey shows 64% of respondents seeing steel prices stabilize, while 27% say tariffs on copper and steel conduit are driving up electrical costs. Plumbing materials are also escalating above normal, with further increases expected next quarter. Specialty imports, including custom lighting, remain exposed to tariff-driven price spikes and longer lead times.