Cautious in 2026, optimistic for 2027: Cost Guide insights

Influencers of cost dynamics

The construction industry rarely moves in a straight line, and 2026 is no exception. Between 2024 and 2025, high interest rates, persistent inflation, and supply chain constraints slowed private residential and commercial development across Canada. The industry wasn't recovering so much as recalibrating, and costs have since settled at a new baseline.

The 2026 Canadian Cost Guide points to a market where cost dynamics are increasingly shaped by structural factors including labour availability, regulatory complexity, trade policy, and geopolitical conditions, rather than traditional escalation drivers alone. Nowhere is that clearer than in the regional picture, where the same national forces are producing very different outcomes market by market.

A tale of diverging regions

In 2026, there is no single Canadian cost story. Toronto and Vancouver — the country's two largest markets — are the predominant outliers, with overall construction costs coming down over the past year, driven almost entirely by distressed residential and condo sectors. The rest of the country is moving decisively in the opposite direction: Calgary, Edmonton, Montreal, and Winnipeg all reported overall cost increases of 4% or more, while Halifax and St. John's saw modest increases in the 1–3% range. Ottawa was the exception in central Canada, with cost declines in competitive segments.

What ties these divergent regional pictures together is that the primary pressure points — metals, labour, and geopolitics — are remarkably consistent even when the direction of the cost trend isn't.

Toronto

Toronto's overall construction costs stabilized in 2025, with residential building types — low-rise, mid-rise, and high-rise alike — steadily declining over the past year. The driver is a lack of new residential projects entering construction, tied to market uncertainty and declining asset values, which has produced competitive bidding from general contractors, trades, and suppliers. Concrete formwork, earthworks and shoring, finishing trades, and windows have seen the sharpest decreases, while mechanical and electrical pricing has flattened after several years of increases and is now trading competitively. Labour costs are largely flat with modest increases baked into multi-year union collective agreements, and availability is plentiful with no shortages.

Against that backdrop, many developers are pivoting toward rental buildings, volumetric modular construction, and manufacturing. Infrastructure and public-sector ICI markets remain busy, as Anil Ramjee, Senior Director, Development Advisory at Altus Group observes, with mechanical and electrical trades trending up and labour costs in infrastructure remaining elevated as project volume continues to outpace skilled trade capacity. As Koover Vohra, Senior Director, Development Advisory at Altus Group summarizes: this is the best time to start new construction projects, with pricing at or approaching the most affordable levels in the last three to five years and plenty of trade labour availability. The biggest wildcard is the possibility of Canada and the GTA entering a recessionary environment — driven by trade and geopolitical disruption or energy price shocks — which could further restrict capital flows into real estate development and push construction costs down further still.

Vancouver

Vancouver is one of two major markets where overall construction costs came down in 2025, driven almost entirely by a cooled residential concrete condo tower segment with few new starts. Public sector projects including hospitals, schools, and BC Housing affordable developments are moving in the opposite direction, with costs continuing to climb. Material pressure is concentrated in anything tied to US-sourced steel or aluminum, affecting mechanical, electrical, and structural scopes, while formwork, reinforcing steel, excavation, and glazing have softened.

Across Vancouver, labour remains constrained for large infrastructure projects but more readily available for private work, as fewer new projects are starting than completing. As Ross White, Director, Development Advisory at Altus Group, notes: if you have a shovel-ready project in Vancouver right now, you can achieve competitive trade pricing below budget. Ryan Perrie, Director, Development Advisory at Altus Group notes: shifts in development charges or building code requirements could materially influence project viability and overall construction costs. The wildcards to watch are CUSMA renegotiations and energy prices tied to ongoing geopolitical tensions.

Calgary & Edmonton

Costs in Alberta's two major markets increased significantly — 4% or more year-over-year — with healthcare and institutional projects leading the pressure due to specialized trade requirements and evolving green code standards. Low-rise residential and renovation costs also increased. Metals costs rose on the back of US tariffs, while lumber softened as post-pandemic oversupply normalized against demand.

Skilled labour shortages are the single biggest risk for 2026 price volatility in the region, driving rates up directly through wage increases and indirectly through schedule risk and reduced bid competition. Stuart Boyce, Senior Director, Development Advisory at Altus Group, describes the Alberta market as structurally strong but uneven across asset classes, with residential and industrial/logistics activity supported by population migration and historic housing shortages.

Winnipeg

Winnipeg saw overall construction costs rise by 4% or more in 2025, with institutional buildings like hospitals and police stations experiencing both year-over-year escalation and upward pressure from advancing design standards, particularly in healthcare. The material story is almost entirely about metals. As Curtis Cameron, Director, Development Advisory at Altus Group put it, "the simple answer is metals — not just raw steel, but the large share of mechanical and electrical (M&E) materials that depend on them."

Wood products have been comparatively stable. Labour costs are climbing with inflation and availability is holding steady, though demand is expected to grow. Despite these pressures, Cameron points to a robust residential sector with low inventory that should buoy the market in the near term and fuel increased infrastructure spending.

Ottawa

Ottawa is the exception to central Canada's upward trend. Overall costs declined in competitive segments like schools and apartment buildings, while specialty projects such as labs and hospitals held mostly flat. Cost increases in those asset types are driven by their reliance on specialty items, while locally available materials including lumber, rebar, and aluminum have softened as regional supply has eased pressure. Labour is more readily available than in recent years, though efficiency remains a challenge, and the gradual decline in temporary workers is likely to pressure labour costs over the longer term.

The wildcards to watch in this region are rising oil prices, which could affect civil and excavation work, and ongoing tariff pressure on lumber and steel. As Attila Bogdan, Associate Director, Development Advisory at Altus Group observes, Ottawa is seeing a drop in tender results due to increased competition, though he cautions this may not be sustainable given ongoing global factors Canada is not immune to.

Montreal

Montreal saw overall costs rise 4% or more in 2025. Residential rental projects continue to see strong activity across the Montreal and Quebec City metropolitan regions, while the downtown condo market has declined with no real signs of recovery. Industrial warehousing remains a bright spot, although it is showing signs of oversupply. Metal products, manufactured materials, and equipment containing metal components are driving the bulk of material cost pressure.

Once again, labour emerges as a primary market constraint. Following negotiations in spring 2025, the Quebec labour agreement locked in wage increases of 8%, 5%, 5%, and 4% over four years — well above normalized inflation — with no meaningful new labour supply expected. Sergio Callocchia, Senior Director, Development Advisory at Altus Group, notes that while development remains active in midtown, suburban, and regional areas, 2026 is showing signs of decreasing appetite among private developers as margins, costs, and labour shortages continue to weigh on feasibility. The biggest wildcard for the region is possible changes to free trade with the US and the resulting tariff impact on manufactured goods.

Halifax & St. John's

The Atlantic markets saw modest overall increases in the 1–3% range, with apartment buildings coming to market, infrastructure projects responding to recent growth, and commercial and retail projects progressing despite delays. In St. John's, structural steel and metal fabrications saw the biggest material increases, while lumber and wood products remain elevated but are no longer a primary cost driver. Halifax is largely holding steady on materials with no major increases or decreases, while labour remains the central concern across both markets.

In Halifax, low availability drives prices upward, and the Maritime region is increasingly testing its ability to retain skilled trades as central Canadian projects draw regional capacity away. In St. John's, Tammy Stockley, Director, Development Advisory at Altus Group identifies a uniquely regional wildcard: if major industrial projects like Gull Island and Bay du Nord advance simultaneously, they could saturate local resource capacity and sharply drive up costs across Newfoundland and Labrador. David Dooks, Associate Director, Cost Monitoring at Altus Group adds that development in the Maritimes depends on relationships first, as the capacity of experienced skilled trades is limited given the current volume of work underway.

Monitoring costs in a dynamic market

Canada's construction outlook for 2026 remains cautious, with optimism building toward 2027.

Stabilizing interest rates and improving financing conditions should support a measured recovery in private-sector activity, and public-sector infrastructure and institutional investment will remain a primary driver in many regions. But the regional divergence captured in this year's guide points to a clear takeaway for developers and project owners: national averages will tell you less than ever in 2026. Metals, labour, and geopolitical conditions are shaping costs in ways that look very different from market to market — and structural factors are increasingly outweighing traditional escalation drivers.

The 2026 Canadian Cost Guide offers a detailed, region-by-region breakdown of construction costs across Canada's major markets — grounded in local data and informed by Altus Group's on-the-ground experts. However, we strongly recommend that you consult with our qualified professionals to create an accurate estimate and pro forma figures tailored to the specific conditions and details of your unique development and infrastructure projects.

Want to be notified of our new and relevant CRE content, articles and events?

Disclaimer

This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice or services of Altus Group, its affiliates and its related entities (collectively “Altus Group”). You should not act upon the information contained in this publication without obtaining specific professional advice.

A number of factors may influence the performance of the commercial real estate market, including regulatory conditions and economic factors such as interest rate fluctuations, inflation, changing investor sentiment, and shifts in tenant demand or occupancy trends. We strongly recommend that you consult with a qualified professional to assess how these and other market dynamics may impact your investment strategy, underwriting assumptions, asset valuations, and overall portfolio performance.

No representation or warranty (express or implied) is given as to the accuracy, completeness or reliability of the information contained in this publication, or the suitability of the information for a particular purpose. To the extent permitted by law, Altus Group does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. The distribution of this publication to you does not create, extend or revive a client relationship between Altus Group and you or any other person or entity. This publication, or any part thereof, may not be reproduced or distributed in any form for any purpose without the express written consent of Altus Group.