Construction Industry Reflections from Penntex President Jim Hoolehan
Over the past several years, the commercial and industrial construction industry has faced a great deal of uncertainty. Rising material costs, shifting economic conditions, elevated vacancy rates, and changing development activity have all influenced how owners and developers approach new projects. While many of those factors remain part of the conversation today in mid-2026, we’re beginning to see encouraging signs that momentum is returning across our region.
Market Activity is Returning in Pennsylvania and New Jersey
From what we’re seeing across Pennsylvania and New Jersey, activity in the warehouse and distribution sector has picked up noticeably over the past several months, despite project costs escalating since the beginning of the year. After a period where some projects were paused or delayed as developers evaluated market conditions, many are now moving forward.
Vacancy rates have improved in key markets, previously unleased buildings are being absorbed, and developers are gaining confidence in the next wave of opportunities. We’re also seeing renewed interest in larger facilities, including several million-square-foot projects that would have been far less common to discuss even a year ago.
Construction Costs Trends: Putting today’s costs in context
With renewed market activity comes renewed pricing pressure.
Over the last six months, the cost to construct a typical industrial building shell has increased approximately 7% to 15%, depending on the size and scope of the project. Understandably, these escalating costs are a significant concern for many of our clients.
At Penntex, we’ve tracked industrial warehouse construction costs on a quarterly basis since 2018. The volume of industrial building shell projects we hard bid across Pennsylvania and New Jersey provides us with real-time pricing insight from our subcontractor partners. Combined with our historical cost database, that information helps us identify market trends, understand shifts in pricing, and provide clients with timely, data-driven guidance.
While today’s cost increases are significant, it’s important to view them in the context of historical pricing trends. Our data helps clients understand not only where costs are today, but how they’ve changed over time, enabling more informed planning and budgeting decisions.
Looking at our historical cost data over the past 3 years, pricing remained relatively stable through 2023 and 2024. Beginning in early 2025, however, industrial building shell costs dropped as construction activity slowed in response to impact of tariffs. Subcontractors became increasingly competitive in pursuing available work and trade costs dropped to their low point at the end of 2025 causing shell costs drop approximately 7% to 17% (depending on building size) in one year.
Over the past six months, that trend has reversed. As construction activity has accelerated and demand has returned, shell costs have risen steadily, bringing pricing back to levels comparable to those seen at the beginning of 2025. While the recent 7% to 15% increase is notable, it largely reflects a recovery from the pricing dip experienced during the market slowdown rather than an unprecedented surge in construction costs.
Owners and developers have grown tired of waiting on the sidelines, and market indicators are increasingly signaling that it’s time to build. As a result, contractors are becoming busier, subcontractors are filling their backlogs, and demand for materials continues to increase. This renewed activity is driving construction costs higher and extending lead times for many building materials and equipment.
Market Forces Influencing Costs
Several additional factors are also affecting construction pricing and project schedules.
Data center development continues to generate significant industry attention. Many of these projects require substantial quantities of heavy structural steel, increasing demand in certain segments of the steel market and influencing pricing and lead times. Ongoing conversations with suppliers, subcontractors, and development partners provide valuable insight into how these broader market trends are affecting projects throughout the region.
We’re also keeping a close eye on what could become another “Amazon effect” on the industrial construction market. Amazon has plans for as many as 30 new one-million-square-foot distribution centers this year. While it’s unclear how many will ultimately move forward, projects of that scale typically require significant steel commitments early in the process. As production capacity is reserved, supply can tighten, creating additional pricing pressure and extending lead times across the market.
Power availability has also become an increasingly important consideration. As industrial facilities become more automated and energy-intensive, developers are placing greater emphasis on utility capacity during site selection and project planning.
Fuel prices have been another important factor affecting construction costs this year. Between March and May 2026, the East Coast fuel index climbed nearly 48% to more than $5.50 per gallon (based on PennDOT and NJDOT monthly indices). Those increases extend well beyond the cost of fuel itself, influencing everything from sitework and asphalt pricing to material transportation and delivery costs. While elevated fuel costs have added pressure to project budgets, we’ve recently begun to see prices move back down. If that trend continues, it should help relieve some of the cost pressures affecting construction projects across the region.
Roofing costs are also experiencing upward pressure due to uncertainty in oil markets. We are receiving notices from suppliers regarding upcoming price increases and the potential for material shortages, particularly with ISO board insulation.
Looking Ahead
Although challenges remain, the overall outlook is increasingly positive. Owners and developers appear ready to move forward after a period of caution, and we’re seeing projects transition from concept into active planning and construction.
At Penntex, we’ll continue monitoring pricing, subcontractor activity, material availability, and market trends on a weekly basis. By sharing real-time market intelligence and historical cost data, we help our clients make informed decisions, develop realistic budgets and project timing before construction begins. Those conversations don’t eliminate uncertainty, but they help owners and developers understand their options and make informed decisions as projects move forward.
