U.S. Construction Costs Rise, Pressuring CRE Development

U.S. commercial property developers and owners are facing higher construction and operating expenses after nonresidential construction inputs rose 8.9% year over year in August. Multifamily construction inputs also increased 7.5%, while higher copper, steel and maintenance costs added further pressure to development and property budgets. 

Key Takeaways

• Nonresidential construction inputs increased 1.3% in August and 8.9% year over year. 
• Multifamily construction inputs rose 1.3% in August and 7.5% annually. 
• Copper prices increased 4.2% during August and 27.2% from a year earlier. 
• Steel prices rose 1.7% in August and 23.4% year over year. 
• Nonresidential repair and maintenance costs increased 9.6% year over year. 

The latest Producer Price Index data show that construction-related costs increased across several categories in August, adding expense to projects that require new construction, renovations, tenant improvements and property maintenance. The U.S. Bureau of Labor Statistics reported that final-demand producer prices increased 0.4% in August and 5.4% over the 12 months ended in August. 

The construction-input figures provide a more direct measure of costs faced by developers and property owners. Nonresidential construction inputs increased 1.3% during August and 8.9% from August 2025. Multifamily construction inputs also rose 1.3% during the month and 7.5% over the year.

The increases affect more than ground-up construction. Higher costs can also apply to improvements, renovations, tenant work and other capital projects that require construction materials or specialized services.

U.S. Construction Costs Increase Across Commercial Property Inputs

The August data showed a broad increase in the costs associated with commercial property construction and operation. Nonresidential construction inputs increased 8.9% over the year, while multifamily construction inputs increased 7.5%. Both annual increases were the fastest since November 2022, according to analysis of the latest data. 

The monthly increases were also significant. Nonresidential and multifamily construction inputs each increased 1.3% in August. Those figures followed two months of softer annual increases, making the August readings notable within the recent data series. 

The BLS Producer Price Index measures changes in prices received by producers for domestically produced goods, services and construction. The construction-input measures therefore track price movements affecting the inputs used in construction rather than changes in completed property values. 

That distinction matters for commercial real estate development. A higher construction-input index does not mean that every property or project experienced the same increase in total costs. Individual projects can face different expenses depending on their design, location, materials, labor requirements and construction stage.

The figures nevertheless show that developers and owners are operating with higher costs for construction-related work than they faced a year earlier.

Related residential construction data also show that material costs have been affecting builders at different rates depending on project size.

Nonresidential and Multifamily Construction Costs Accelerate

The increase in nonresidential construction inputs covers properties and projects outside the residential construction category, including commercial development and improvements. Multifamily construction inputs provide a separate measure for apartment-related construction costs.

The 8.9% annual increase in nonresidential inputs was larger than the 7.5% increase for multifamily inputs in August. Both categories rose by 1.3% from July. 

Higher construction costs can affect the amount required to complete a project because materials and other construction inputs represent part of the total development budget. For projects already under development, higher prices can increase expenses for work that remains to be completed.

The same issue applies to commercial properties undergoing renovations or improvements. Construction work can include building upgrades, tenant improvements and capital projects that are separate from a property’s original development.

For multifamily developers, the 7.5% annual increase adds another cost consideration to apartment construction budgets. The measure does not establish whether individual projects will be delayed or canceled, but it does show that the cost of multifamily construction inputs was higher than a year earlier.

The broader Producer Price Index also showed that prices for inputs to construction producers increased in August. The BLS reported a 1.2% monthly increase in the index for inputs to stage-four construction producers. 

Commercial project costs can also vary because of expenses beyond basic construction materials, including design, permitting, site work and other project-specific requirements. 

Material Costs Add Pressure to Development

Material prices contributed to the higher construction costs recorded in August. Copper prices increased 4.2% from July and 27.2% from August 2025, while steel prices rose 1.7% during August and 23.4% over the year. 

Copper and steel are used across commercial construction, including electrical systems, structural components and other building applications. Price changes for those materials can therefore affect different portions of a construction budget.

Diesel prices also became a cost factor for construction activity and material transportation. The construction-cost analysis reported that the national average diesel price had moved above $6 per gallon by September 11, although those later price increases were not yet reflected in the August inflation data. 

Because the August Producer Price Index measures prices during that month, subsequent movements in fuel and material costs are not included in those figures. The distinction is relevant when evaluating current project expenses against the August data.

Copper and Steel Prices Add to Development Expenses

The August increases in copper and steel prices provide specific examples of the material costs affecting construction.

Copper prices were 27.2% higher than a year earlier after increasing 4.2% in August. Steel prices increased 23.4% over the same period after rising 1.7% during August. 

The changes can affect projects at different stages because material requirements vary by property type and construction plan. A commercial development with substantial electrical, structural or mechanical work can have different exposure to commodity prices than a project with fewer material-intensive requirements.

The data also matter for renovation and improvement work. Commercial owners planning capital projects must account for the cost of materials required to complete those projects, regardless of whether the work involves a new building or an existing property.

Construction costs are only one component of a commercial property’s financial structure. Labor, financing, insurance, taxes, utilities and other operating expenses can also affect project economics and property-level cash flow.

Recent U.S. housing coverage has similarly documented higher prices for construction materials such as copper and other building inputs, providing additional context for the material-cost figures. 

The August data therefore provide a specific measure of cost pressure rather than a complete assessment of the profitability or feasibility of any individual commercial property project.

Commercial Property Maintenance Costs Rise

Cost pressure also extended beyond construction inputs. Nonresidential repair and maintenance costs increased 1.5% in August and 9.6% from a year earlier. Residential repair and maintenance costs increased 1.2% during the month and 8% annually. 

The increase in nonresidential repair and maintenance costs affects owners of existing commercial properties as well as developers of new projects. Maintenance expenses can include work required to keep buildings and property systems operating.

The 9.6% annual increase was the fastest annual gain in that category since late 2022, according to the analysis of the August data. 

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Higher maintenance costs can affect property operating budgets independently of new construction activity. An owner may face increased expenses even when no major development or renovation project is underway.

The combination of construction and maintenance cost increases creates separate expense considerations for new and existing properties. Developers face higher costs for building and improvements, while owners of existing properties face higher costs for repairs and maintenance.

Those expenses can also occur alongside other property-level obligations. Commercial owners must account for operating expenses and capital requirements when assessing the financial performance of a property.

Maintenance Expenses Increase for Property Owners

The increase in repair and maintenance costs provides a direct measure of higher expenses for existing nonresidential buildings. The 9.6% annual increase exceeded the monthly increase of 1.5%, showing that the cost category was substantially higher than it was a year earlier.

Maintenance decisions can also affect the timing of property improvements. Owners may separate routine repairs from larger capital projects, meaning changes in maintenance prices do not automatically translate into changes in development activity.

The August figures nevertheless show that higher costs are affecting both sides of the commercial property equation: construction inputs for projects and repair expenses for existing buildings.

Frequently Asked Questions

What are the latest U.S. construction cost increases?

Nonresidential construction inputs increased 1.3% in August and 8.9% from August 2025. Multifamily construction inputs rose 1.3% during the month and 7.5% year over year. 

How much did nonresidential construction costs rise in August 2026?

The relevant nonresidential construction-input measure increased 1.3% in August. Its year-over-year increase was 8.9%.

How are higher material costs affecting commercial real estate?

Higher material prices increase the costs associated with construction and property improvements. Copper rose 27.2% year over year in August, while steel increased 23.4%. 

What happened to multifamily construction costs in August 2026?

Multifamily construction inputs increased 1.3% in August and were 7.5% higher than a year earlier. 

How much did commercial property maintenance costs increase?

Nonresidential repair and maintenance costs rose 1.5% in August and 9.6% from a year earlier.