Developers are bracing for a challenging year ahead, with only 6% expressing strong optimism. According to The Urban Developer 2026 Industry Sentiment Survey, 35% feel pessimistic, and 60% have grown more negative since last year. Construction costs are a major concern, but the survey reveals a deeper issue.
A staggering 92% anticipate rising construction costs in the next 12 months, with nearly half expecting increases of 5-10%. Labor costs have surpassed materials as the primary pressure point, scoring 5.53 out of 7 compared to materials at 5.23.
Labor Shortages: A Long-Standing Issue
WT national director James Ford explains that this shift has been years in the making.
Specialist trades, including mechanical, electrical, hydraulic, and fit-out work, are particularly strained, resulting in longer lead times and fewer tender submissions rather than just higher prices.
Industrial Assets Show Resilience
Industrial and logistics assets are performing better, thanks to mature delivery models and strong digital engineering. This certainty is a recurring theme in WT’s analysis of the survey results.
A significant 73% of respondents expect builder insolvencies to worsen, and the same percentage predicts a shrink in contractor and subcontractor capacity. 59% believe the tendering environment will deteriorate further.
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Financing Challenges Add to the Squeeze
The survey also highlights financing difficulties, with 45% expecting debt financing to become harder to access and 61% anticipating higher costs. 59% foresee liquidity issues among project financiers.
Additionally, 64% believe vendors need to lower their price expectations for development sites, indicating that cost pressures are impacting land values as well as construction budgets.
The challenges faced by developers are structural rather than cyclical, according to Ford.
A Mixed Outlook, but Some Developers Press On
Despite the gloomy forecast, the industry isn’t stagnant, and optimism and pessimism are nearly evenly split. 48% describe themselves as optimistic or very optimistic, and 23% plan to grow rapidly despite the conditions.
The industrial sector stands out as the only asset class with a positive 12-month value outlook, ranking highest in feasibility fundamentals and expected value gains.
This approach, focusing on the present rather than waiting for market improvement, is central to The Construction Cost Crunch white paper, produced in partnership with WT. The paper provides a detailed breakdown of construction cost questions, including cost forecasts, cost drivers, and insights into successful developer strategies in 2026.