Geopolitical headwinds and structural labor constraints reshape North America office fit-out costs

Hunger for Quality in a Supply-Constrained Market

The demand for higher quality space is intensifying just as the supply of premium office space is shrinking. Office availability has now fallen for an unprecedented seven consecutive quarters in the U.S., while the construction pipeline remains at historic lows. As a result, occupiers are competing for a limited pool of high-quality existing space, making strategic renovation and fit-outs the primary pathway to securing the AI-ready, talent-attracting environments they need.

Technology is the new standard for a competitive office, with previously premium offerings like integrated building systems and advanced AV now considered baseline requirements. This new standard is clearly reflected in project budgets: Mechanical and Electrical (M&E) services now account for 29% of a typical fit-out, with Security, IT, and AV (SITAV) representing another 10%. Combined, these technology-related systems make up nearly 40% of total costs.

Compounding the costs of this technical demand the report identifies several persistent structural factors driving a challenging cost environment. Trade and tariff policies continue to impact the cost of construction materials, while global energy instability affects supply chains. In tandem, structural labor shortages are creating acute scarcity in the technically skilled trades most relevant to building out today's complex, AI-ready workplaces.

The Early Mover Advantage

"Clients who are holding out for costs to come down before committing to a project are taking a real risk," said Louis Molinini, Head of Project and Development Services, Americas at JLL. "The structural pressures - labor, trade, technical complexity - are not going to unwind on a timeline that favors waiting. The primary way occupiers compete for talent right now is through the quality of their space, and the bar for what that means has moved up considerably."

In this dynamic environment, the report cautions that a 'wait-and-see' approach carries significant risk. JLL's analysis finds that trade and labor cost impacts are expected to compound faster than any anticipated relief from interest rates. Organizations that act decisively now to invest in high-performance space, ahead of policy relief, will be better positioned to manage costs, avoid further escalation risk, and secure a long-term competitive advantage.

"That cost variance is often driven by local labor dynamics," said Daniel Pomfrett, Managing Director, Cost Management at JLL. "The spread between a baseline fit-out at approximately $255 per square foot and a high-specification buildout at $355 per square foot is significant, but that gap can widen even further depending on the market. That's the conversation clients need to be having at the front end of capital planning, not after budgets are set."

Markets in focus

Fit-out costs across the U.S. and Canada move in the same direction but not at the same speed. New York anchors the high end of the cost spectrum, with San Francisco and Boston close behind. While mid-range markets like Chicago and Seattle are more competitive than the coastal gateways, the Sun Belt markets-including Dallas and Atlanta-represent the most competitive end of the spectrum, supported by larger and more flexible labor pools that have absorbed the current cycle's cost pressures more readily.

Canadian markets present their own unique dynamics. Office fit-out costs are up 3 to 4 percent in 2026, with cities like Toronto and Vancouver consistently landing at or above the upper cost range of comparable U.S. secondary markets, reflecting distinct structural labor costs and regulatory environments. This creates consequential uncertainty for occupiers managing cross-border portfolios, especially as the mid-year USMCA review is expected to have consequences for materials and tariffs on both sides of the border. However, Canada's relative insulation from global energy price volatility through its domestic supply may mitigate some of the larger cost swings threatening other global markets.

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JLL (NYSE:JLL) is a leading global commercial real estate services and investment management company with annual revenue of $26.1 billion, operations in over 80 countries and a global workforce of more than 113,000 as of March 31, 2026. For over 200 years, clients have trusted JLL, a Fortune 500^® company, to help them confidently buy, build, occupy, manage and invest across a variety of industries and property types, including office, industrial, hotel, multi-family, retail and data center properties. Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAY. Powered by rich global datasets and leading technology capabilities, we provide coordinated, end-to-end delivery of real estate services for a broad range of global clients who represent a wide variety of industries. Through LaSalle Investment Management, we invest for clients on a global basis in both private assets and publicly traded real estate securities. For further information, visit jll.com.

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