Office Construction Costs Slow Down

The relentless rise in office construction costs has finally shown signs of slowing. In 2025, the pace of price increases for building materials and engineering equipment decelerated, marking a shift from the aggressive inflation seen in previous years.

This cooling trend is directly attributed to a broader slowdown in the construction of commercial real estate and a softening in overall market demand. While costs are still rising, the rate of growth has moderated significantly, offering a potential reprieve for developers.

The data reveals a clear deceleration in price growth. In 2025, the cost of construction, finishing materials, and engineering equipment rose by 4.3% to 8.8%. This stands in stark contrast to the previous year, where similar expenses saw price hikes ranging from 10.1% to 16%.

The reduction in the rate of cost growth is a direct reflection of the changing market dynamics. As the construction of business centers slows and demand stabilizes, the pressure on supply chains and material costs has eased, leading to more moderate price increases.

• Construction materials price growth: 4.3–8.8%
• Finishing materials price growth: 4.3–8.8%
• Engineering equipment price growth: 4.3–8.8%
• Previous year's growth rate: 10.1–16%

The primary driver behind this cost moderation is the slowing pace of construction itself. When fewer projects are initiated, the intense competition for materials and labor diminishes, which naturally tempers price inflation.

Simultaneously, a decline in demand for commercial real estate has played a crucial role. With businesses reevaluating their office space needs in a shifting economic landscape, the urgency to build new centers has waned. This dual slowdown in both supply (construction) and demand (tenancy) has created a more balanced, albeit cooler, market environment.

Despite the positive trend of slowing cost growth, developers face a complex challenge. The prevailing macroeconomic situation suggests that a full-scale reduction in construction costs is unlikely. While the rate of increase has fallen, costs remain elevated, and the broader economic climate presents significant headwinds.

Developers are navigating a landscape where material prices are still climbing, just at a slower pace. This creates a difficult environment for budgeting and project planning, as the certainty of cost reduction remains elusive.

The current macroeconomic environment makes it unlikely that developers will be able to significantly lower their construction costs.

The deceleration in cost growth for office construction is a key indicator of the health of the commercial real estate sector. It suggests that the market is moving toward a new equilibrium after a period of intense volatility.

However, the path forward remains uncertain. The interplay between macroeconomic factors, material availability, and sustained demand will determine whether this slowdown is a temporary pause or the beginning of a new, more stable phase for office development costs.

The year 2025 has brought a notable shift in the economics of office construction. The aggressive cost inflation of the past has given way to a more measured pace of price increases, driven by a cooling market.

While this moderation offers some relief, the underlying macroeconomic conditions suggest that cost pressures will persist. Developers must navigate a landscape where prices continue to rise, albeit more slowly, as they adapt to new market realities.