By Roland Murphy for AZBEX
While shifts and tempo changes have rippled through the construction market, the uncertainty and across-the-board slowdown many predicted in 2025 never materialized.
According to the Rider Levett Bucknall Q4 2025 Quarterly Construction Cost Report, construction spending was down slightly, dipping 1.8% versus Q4 2024. Activity levels varied across sectors, with data centers and other large-volume megaprojects maintaining momentum, while commercial and institutional projects shifted only slightly.
Even though the Federal Reserve began lowering interest rates modestly in 2025, and lower rates allowed several projects to start moving forward, the fact that rates are still higher than many find palatable indicates refinancing of projects already underway will remain a more likely construction market factor than advancing a host of new starts.
Among factors to keep in mind going into 2026 is the persistently challenging state of the available construction workforce. Education and industry collaboration to increase workforce supply are improving, but the sizeable gap between supply and demand continues to influence project costs and schedules.
Also, a factor for the year ahead will be the weakened design pipeline. The Architecture Billings Index remains below the midpoint of 50. Fewer projects are entering the design phase, and work is progressing more slowly across the process. RLB President North America Paul Brussow said in his commentary, “This lag upstream reinforces the broader pattern we’ve seen: projects are not stopping outright, but they are advancing cautiously, often at reduced speed.”
According to the U.S. Department of Commerce, the seasonally adjusted estimate of construction put in place in August was approximately $2.17T, which was 0.2% more than the revised July estimate and 1.6% less than the August 2024 estimate.
Phoenix vs. Other Markets
RLB tracks annual percent changes in construction costs on a quarterly basis for 17 markets around the U.S.
As in Q3, Phoenix saw the fourth-largest annual percent change in Q4, rising 4.76%.
Honolulu recorded the largest gain, coming in at 5.69%. Washington, D.C., had the lowest percent change at 3.64%.
Across the 17 markets, the annual percent change averaged 4.42%.