The Price of "Better"

🛸 One small step, one very large invoice

Space exploration isn't the only project running over budget lately—although hopefully we're not talking billions of USD.

The office market is building less than it has in 25 years, yet fit-out costs (the price of transforming raw office space into somewhere people want to spend 40+ hours a week) rose 5.5% across the Americas last year. Not a single general contractor we’ve surveyed expects prices to fall over the next six months.

🗺️ Same story, different time zone

Of more than 340 general contractors across the Americas, Europe, the Middle East and Africa, and Asia Pacific, responses show a picture of an industry absorbing more cost than it's passing through to clients.

In the Americas, 83% of contractors expect their suppliers to raise prices, but only 63% plan to raise their own. The share of contractors holding prices steady rather than passing costs on has risen seven percentage points in a single year. For occupiers moving now, that gap is effectively a window—contractors are competing hard enough that the market is doing some of the negotiating for you.

Priciest markets globally

Most cost-effective markets globally

⚡The usual suspect

The reason costs keep climbing anyway shows up in the itemized bill. Electrical work now represents the single largest line item in a fit-out globally. Electrical costs are being pulled upward by a competitor most occupiers haven't thought to blame: the data center.

Copper demand has been driven structurally higher by the AI infrastructure build-out, meaning the underground boom is inflating the 22nd floor renovation. Add tariffs on steel and aluminum, a skilled labor shortage keeping construction wages growing at nearly twice the rate of employment, and the conflict in Iran that pushed Brent crude past $112 this week (the largest one-month oil price surge since 1988)…leaving us with rising costs, regardless of how little anyone is building. 

Much like your kitchen renovation (contractor is booked six months out, materials tariffed, and everyone craving the same induction range…) timing the decision right matters more than it used to. Find out how much a fit out would cost in your market.

As AI reshapes how work gets done, @Richard Pickering argues that the office is evolving from a container for desks into a hub for decisions—one that demands acoustic-grade rooms and frictionless audio-visual connectivity (no more forty-five seconds of "can you hear me now" before every hybrid call) as baseline requirements. The office everyone needs to build costs more than it used to.

⛹️♂️ March madness

Every March, the upsets come from wherever you least expect them. This year's bracket-buster for the data center industry isn't a rival technology or even a funding drought—it's the zoning commission.

At least $156 billion across 48 data center projects was blocked or stalled in 2025 amid coordinated local opposition. Unnerved by electricity demands and sprawling footprints, county councils are denying permits and withdrawing tax breaks at a rate that is forcing hyperscalers like Google, Microsoft and Meta to reroute. In Virginia, the global epicenter of data center construction, the state budget is currently stalled over whether to end a tax break for data centers worth at least $1.6 billion in fiscal year 2025. In Illinois, a new biometric privacy law and a pause on tax incentives ended projects overnight.

Like March Madness bracketology, data center developers are learning that picking winners is harder than it looks. The industry thought it had found safety in red states, but even there, opposition is growing. The Texas Republican Party passed a resolution last month calling for a halt to new construction until certain guardrails are in place.

John McWilliams , Head of Data Center Insights, told the The New York Times this week that demand is now being managed by regulation—a shock to a sector that spent years operating largely under the public radar.

Secondary markets like the Carolinas, Central Washington, and Pennsylvania may be in the position to pull off the upset by offering what the favorites no longer can: a clear path to the grid and a community that still wants them there.

🪙 Keep calm and read Kevin With oil markets rattled and recession chatter building, Chief Economist Kevin Thorpe put out a measured reality check in The Note. His take: if Hormuz disruption proves temporary, oil averages around $90 in the first half of 2026 before easing toward $70, and the CRE momentum building before the conflict should resume. CRE values have already corrected, pipelines are shrinking, and capital markets’ momentum remains intact. Read March’s edition.

💶 Investors like Living in Europe Institutional investors have been loading up on European living assets. Two-thirds of our survey respondents already hold allocations of 20% or more, and 96% plan to increase exposure over the next five years—more than half by a “significant” margin. Get the full picture in our latest European Living Investor Survey.

📢 Permission not granted Ali Greenwood told CoStar this week that data center developers are navigating utility companies "constantly changing the rules" on power access alongside growing community pushback. The workaround for now seems to be rural land, alternative energy, and friendlier politicians—though as Texas is proving, nowhere is guaranteed “friendly” forever. Read the full story.