In the first half of 2024, construction costs stabilized. And through the remainder of this year, total cost growth is projected to be modest, and matched by an overall increase in construction spending.
That prediction can be found in JLL’s 2024 Midyear Construction Update and Reforecast, released today. JLL bases its market analyses on insights gleaned from its global team of more than 550 research professionals who track economic and property trends and forecast future conditions in over 60 countries.
![](/sites/default/files/inline-images/Revised%20forecast.png)
The Update acknowledges that the industry has been adjusting to new patterns of demand, as not all sectors are performing equally well. Interest in projects in general has increased, lending regulations are not tightening, and spending is up more than originally anticipated.
Still, the trajectory of interest rates “continues to elude forecasters,” observes JLL, “making ‘higher for longer’ the correct operating paradigm.” Yet despite financial constraints, JLL expects cost growth and development to continue. Stakeholders need to account for maturing debt, lease expirations, and emerging global advantages as they navigate the realities of sustained higher interest rates and varied local outcomes.
One area of opportunity for AEC firms, under these circumstances, is resilient and sustainable design and construction, says JLL.
Spending is outpacing employment availability
![](/sites/default/files/inline-images/Costs%20and%20spending.png)
With these positive outlooks, construction employment has risen, along with compensation. Labor costs driven by limited availability continue to provide a growth floor for broader industry costs. JLL states that its predictions of wage growth at moderately higher than historical rates remain unchanged.
This is because construction spending has been outpacing employment. “Relative strain in production value required per employee is returning to pre-pandemic points [but] with a very different workforce, and remains heavily concentrated in select metros,” JLL states.
While overall growth has been restrained to average below expectations, volatility persists, notably on the cost of materials. Demand for finished goods remains high, especially for MEP products as more sectors electrify and upgrade their operating systems.
Staples of demand are changing and, with them, expectations for price moderation and normal market behavior. For example, bid prices for staple materials such as metals and concrete are at their lowest average monthly movement since 2020. JLL observes that price stability reflects efforts to develop backlogs and secure work and margins. But with global events being so unpredictable, this current period of price stability, says JLL, is transient “and likely short-lived.”
![](/sites/default/files/inline-images/Labor.png)
Big question: continued infrastructure investment
JLL believes that market participants, namely developers, suppliers, and AEC firms, are going to hold their current growth pace over the short term. Its Update advises stakeholders to engage the nuances of local markets and design demands “as early as possible” to determine market direction and to navigate disruptions.
So far, firms have been able to compress their margins, mainly because material costs have trended lower than expected, which in turn has allowed for higher-than-anticipated construction spending. But labor challenges continue unabated and are expected to exert pressure on costs into 2025 and beyond.
Consequently, JLL has revised some of its forecasts for the remainder of 2024, most prominently that total costs would increase just 1-2% for the year, and that construction spending (which JLL previously thought would be flat) will increase.
JLL notes, too, that aggregate materials, currently on the low end of price increases, might experience more volatility. JLL also states that anticipating spending increases—and the price floor that such demand would set—will depend on continued public investment in infrastructure and other construction projects.
Related Stories
Market Data | Apr 20, 2020
6 must reads for the AEC industry today: April 20, 2020
The continent's tallest living wall and NMHC survey shows significant delays in apartment construction.
Market Data | Apr 17, 2020
Construction employment declines in 20 states and D.C. in March, in line with industry survey showing growing job losses for the sector
New monthly job loss data foreshadows more layoffs amid project cancellations and state cutbacks in road projects as association calls for more small business relief and immediate aid for highway funding.
Market Data | Apr 17, 2020
5 must reads for the AEC industry today: April 17, 2020
Meet the 'AEC outsiders' pushing the industry forward and the world's largest Living Building.
Market Data | Apr 16, 2020
5 must reads for the AEC industry today: April 16, 2020
The SMPS Foundation and Building Design+Construction are studying the impact of the coronavirus pandemic on the ability to attain and retain clients and conduct projects and Saks Fifth Avenue plans a sanitized post-coronavirus opening.
Market Data | Apr 15, 2020
5 must reads for the AEC industry today: April 15, 2020
Buildings as "open source platforms" and 3D printing finds its grove producing face shields.
Market Data | Apr 14, 2020
6 must reads for the AEC industry today: April 14, 2020
A robot dog conducts site inspections and going to the library with little kids just got easier.
Market Data | Apr 13, 2020
6 must reads for the AEC industry today: April 13, 2020
How prefab can enable the AEC industry to quickly create new hospital beds and Abu Dhabi launches a design competition focused on reducing urban heat island effect.
Market Data | Apr 10, 2020
5 must reads for the AEC industry today: April 10, 2020
Designing for the next generation of student life and a mass timber Ramada Hotel rises in British Columbia.
Market Data | Apr 9, 2020
7 must reads for the AEC industry today: April 9, 2020
Urine could be the key to building in outer space and how to turn a high school into a patient care center in just over two weeks.
Market Data | Apr 8, 2020
6 must reads for the AEC industry today: April 8, 2020
Stantec discusses how hospitals can adapt buildings to address worst-case scenarios and FXCollaborative Architects tells us why cities will survive the pandemic.