WT’s latest Australian Construction Market Conditions Report confirms what many in the interior fitout sector have sensed for some time: although conditions feel more settled than in recent years, the next wave of construction pressure is already forming.
The drivers behind that pressure are also shifting, with implications that reach into commercial interiors, workplace delivery and the broader fitout supply chain.
The report highlights that national building escalation is expected to ease to 5.2 per cent in 2026, the lowest level in six years, with infrastructure costs following a similar pattern. For many fitout contractors this matches what they are currently seeing – stabilising supplier behaviour, more predictable lead times and pricing that is no longer surging month to month. Yet this period of relative calm will be short.
From 2027 onwards, escalation begins to climb again, with Brisbane facing a particularly sharp increase as major Olympic precinct works and a substantial housing pipeline converge. Sydney and Melbourne will also see renewed pressure, with annual cost increases approaching 5 per cent as labour and capability move north while local activity rebounds.
Michael Brown, WT’s National Workplace Sector Lead, says this transition feels familiar to many in the fitout community.
“We’ve entered a momentary breather, not a reset,” he explains. “Fitout businesses shouldn’t assume that the challenges of 2021 to 2023 are behind us. They’re likely to reappear – just driven by different forces and happening at different speeds across the country.”
Labour pressures return as the first major constraint
Labour availability will be the first and most significant pressure point. Workplace and commercial fitouts rely on a narrow set of specialist trades, and many of those trades are expected to be drawn to Queensland, where long-term project commitments promise continuity of work. Brown notes that this shift could quickly influence day-to-day delivery.
“What worries most of our clients isn’t material pricing – it’s the ability to secure the right subcontractors at the right time,” he says.
“When the main contractors start locking in subcontractors early, it cascades through the market. Flexibility tightens, programs become harder to maintain and short fast paced work becomes more difficult to resource.”
Indirect costs and competing sectors deepen the challenge
Materials and indirect costs will also play a role, though in a more complex way than previous cycles. While timber, steel and imported products have stabilised, indirect cost pressures such as finance, insurance, compliance, overheads and corporate risk allowances, continue to rise and will inevitably reach fitout margins. New demand from utilities, renewables and water projects will further disrupt traditional labour flows, competing for the same trades that deliver high-quality interiors.
A strategic window for digital capability and resilience
Yet WT’s analysis also highlights opportunity. Brown believes this is a strategic moment for fitout businesses to reset how they plan and deliver. “Digital coordination, tighter procurement sequencing and better program intelligence are now essential, not optional,” he says. “Businesses that embed these capabilities in 2026 will be the ones absorbing the least impact when escalation ramps up again.”
Ultimately, the report makes clear that the risk ahead is not just rising prices but rising capability constraints. The interior fitout sector has a rare window over the next 12 to 18 months to prepare by strengthening supply relationships, refining delivery processes and building resilience before the market tightens again.
For those who treat 2026 as a preparation year rather than a quiet year, the next escalation cycle will be challenging but navigable, with the potential to emerge stronger as clients continue to demand speed, quality and reliability.
This article first appeared in Interior Fitout Magazine January – March 2026.
