The Twin Cities new-construction market is heading into 2026 with a familiar mix of momentum and friction. Demand is still there. Long-term fundamentals are solid. But on the ground, projects are feeling heavier — more variables, more stacked constraints, fewer clean starts.

What we’re seeing isn’t one big problem. It’s cost of capital layered on top of labor limits, layered on top of tighter codes, layered on top of permitting timelines. Everything touches everything else.

What’s Making New Construction Harder in the Twin Cities

1. Cost Pressure Is Still the Baseline

Even though supply chains are calmer than they were a few years ago, costs never really came back down. Materials are steadier, but they’re still expensive. And volatility hasn’t disappeared.

What this looks like on real projects:

• Value engineering moving past finishes and into structure, envelope, and mechanical systems
• More scrutiny on wall assemblies, insulation packages, and MEP selections
• Code compliance driving cost conversations earlier than it used to

At this point, cost pressure isn’t a surprise. It’s the starting line.

2. Financing and Soft Costs Are Slowing Starts

As we head into 2026, interest rates, insurance, and regulatory soft costs are still limiting how many projects actually break ground — even when they’re fully entitled.

On the ground, that shows up as:

• Projects that are approved but sitting, waiting on financing
• Smaller first phases to limit upfront capital exposure
• Bids getting refreshed closer to mobilization to manage rate and input risk

The result isn’t canceled work. It’s delayed work. And that delay ripples through the whole system.

3. Production Isn’t Keeping Up With Regional Need

The Twin Cities has long targeted roughly 18,000 permitted housing units per year. Recent years have fallen short of that mark.

That gap matters. When production slows, affordability tightens — but so do schedules. Fewer starts mean trades stack up, competition increases, and timelines compress when projects finally move.

This isn’t theoretical. You feel it when you’re trying to lock subs.

4. Labor Looks Stable — But Capacity Is Still Tight

Employment numbers can look flat and healthy while job sites still feel constrained. That’s because the pressure isn’t evenly distributed.

Certain trades — electrical, HVAC, concrete finishing — are consistently harder to schedule. One delay turns into three.

What that looks like day to day:

• Longer lead times for key subcontractors
• Schedules “accordioning” when one trade slips
• Less float than projects used to carry

Labor availability isn’t collapsing. But true capacity is still tight.

5. Infrastructure Work Is Complicating Logistics

Major metro transportation and corridor projects running through 2025–2026 are affecting access, deliveries, and staging — especially near key routes.

This doesn’t stop projects. But it does require better planning. Miss it early, and it shows up later as friction you didn’t price.

The Improvements That Are Actually Helping

Not everything is getting harder. Some changes — even the ones that add work — are making outcomes more predictable.

1. Energy Code Updates Are Becoming More Predictable

Minnesota is moving toward a regular cadence for residential energy code updates starting in 2026, with long-term goals aimed at major reductions in net energy use. Commercial code updates that took effect in 2024 continue to shape multifamily and larger residential projects.

Why this helps:

• Builders can plan assemblies and systems earlier
• Fewer surprise corrections during plan review
• Product decisions happen with clearer targets

It’s more work upfront — but less chaos later.

2. EV Readiness Is Now an Early Design Decision

EV-ready and EV-capable parking requirements are now part of the baseline for many new multifamily and commercial projects with on-site parking.

Yes, it adds coordination and cost. But it also:

• Reduces future retrofit risk
• Protects long-term asset value
• Aligns infrastructure with buyer expectations

Projects that treat EV infrastructure as a late add-on feel the pain. Projects that plan for it early move cleaner.

3. Digital Permitting Is Reducing Friction

Platforms like Saint Paul’s PAULIE system are streamlining how permits, reviews, inspections, and communication happen.

What’s better:

• Fewer administrative resubmittals
• Clearer visibility into review status
• Less time lost in email chains

Digital tools don’t fix uncoordinated drawings — but when teams are prepared, they help things move.

4. Coordinated Permitting Is Improving Timeline Certainty

For projects with environmental review exposure, state-level coordinated permitting tools are starting to matter. The biggest win isn’t speed. It’s predictability.

Clearer sequencing helps:

• Lock financing
• Schedule trades
• Reduce contingency padding

Uncertainty is expensive. Even modest clarity helps projects pencil.

5. Better Data Is Improving Early Scoping

City-level reporting around housing production, cost barriers, and development trends is getting more specific — and more useful. Instead of national averages, teams can benchmark assumptions against Minneapolis–Saint Paul realities.

That leads to smarter early decisions and fewer mid-stream resets.

What This Means for 2026 Timelines and Budgets

Projects that win in 2026 will front-load design coordination, treat energy and EV requirements as core drivers, assume labor bottlenecks and plan around them, and price logistics and access carefully.

The margin for error is thinner. But the path is clearer than it was a few years ago.

Practical Takeaways

The bottom line

Twin Cities construction in 2026 isn’t broken. It’s just tighter. Projects that respect that reality — and plan for it early — are still getting built. And getting built well.

If you’re thinking about building, buying, or developing, keep the conversation grounded. The details matter more than ever.

We’ll keep tracking what’s working. And we’ll keep sharing what we’re seeing out there.