Our West region experienced an average year-over-year construction cost increase of 4.55% (above the national average of 4.41%). These cities include Phoenix (5.12%), Las Vegas (4.98%), Los Angeles (4.00%), San Francisco (3.92%), Portland (4.77%), and Seattle (4.52%).
Construction activity across the West Region enters 2026 with gradual stabilization following a challenging 2025 marked by sharp nonresidential declines. While financing conditions remain tight, the region is benefiting from national growth in data centers, energy, and infrastructure, which are expected to drive much of the industry’s expansion this year. Policy‑driven labor cost increases and uneven material relief continue to shape project feasibility across Western markets.
- Phoenix and Las Vegas continue to outperform, supported by strong population growth, industrial expansion, and accelerating data‑center development. National trends show data centers and energy projects as two of the strongest growth sectors heading into 2026, and both cities are positioned to capture a significant share of that activity. Rising labor costs and long‑term workforce shortages remain constraints, but demand fundamentals are solid.
- Los Angeles faces a mixed outlook. High financing costs and slower private‑sector development are weighing on residential and commercial starts, mirroring national softness in cyclical sectors such as multifamily, lodging, and traditional office. However, major transportation, port‑related, and public‑sector investments continue to provide stability.
- San Francisco continues to navigate elevated vacancy rates and subdued office demand, but infrastructure, seismic upgrades, and public‑sector work remain active. The region is also seeing early signs of recovery in select tech‑adjacent and life‑science projects, though at a slower pace than in prior cycles.
- Portland and Seattle are experiencing steady institutional and infrastructure activity, supported by state and federal funding. Both markets continue to face the broader West‑wide challenge of high construction costs, driven in part by long‑lasting labor‑policy impacts and persistent workforce shortages.
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