This change is driven by the explosive growth in AI and hyperscale computing, which are altering labor and resource allocation across the industry. The focus has notably shifted from sustainable energy initiatives toward data centers and the infrastructure necessary to support them. By transforming macroeconomic uncertainty into a controllable variable, these organizations can model, hedge, and ultimately leverage tariff impacts for competitive advantage as trade policies evolve.
- ✦ Access county-level building stock data from 1970 with five-year forecasts
- Spending by building owners to make the space more desirable has spurred reconstruction spending, but not enough to offset the decline in new construction.
- In its Engineering & Construction Outlook, FMI Corp., a consulting and investment banking firm focused exclusively on the built environment, expects lodging to grow around 8% annually due to strong occupancy rates.
- The challenge now is how to plan strategically in a market where costs and competition remain unpredictable.
- The single-family housing market faced significant headwinds in 2025, with construction remaining underwhelming due to persistent affordability challenges.
Sami Alami is a managing director at Deloitte focused on creating value through tech- and AI-enabled operations and supply chain transformations, including the deployment of smart operations solutions for clients. Henderson partners with and advises C-suite and executive leaders on top-line growth, customer acquisition and retention, and bottom-line optimization by adopting an AI-first mindset for business models and operations. In this role, she leads the applied AI strategic growth offering, helping Deloitte’s largest IP&C clients create value through the implementation of AI and data. However, if you are a diehard IE fan you can continue to use it, but may have a less than great experience and will receive this annoying reminder every day. As owners evaluate what this higher-certainty threshold means for their capital plans, the following questions can help pressure-test urgency, clarify assumptions and identify the decisions that can improve confidence before moving forward. For owners, the competitive advantage will go to teams that understand the market early, plan around constraints and make informed decisions before risk shows up in the schedule.
- While some new construction continues in major cities, Gaus indicates it’s not “the vast majority of what we’re seeing.”
- The retail category is expected to see less than a 1% decline in spending this year before reversing to 2.0% growth next year, per the AIA Consensus Construction Forecast.
- By Q1 2025, some markets—especially in the South and Midwest—have actually become oversupplied, as evidenced by rising inventories.
- The 2026 construction market outlook is not defined by a lack of demand.
- As economic uncertainty begins to fade, Connor Lokar of ITR Economics offered a data-driven perspective on what lies ahead.
- Know where construction demand is heading by market, type, and territory
The challenge now is how to plan strategically in a market where costs and competition remain unpredictable. For owners and project teams, the challenge is no longer simply whether projects will move forward. The commercial construction market continues to show resilience in 2026, but the conditions shaping projects are becoming more complex. The commercial construction market continues to show resilience in 2026, but the conditions shaping projects are becoming more https://ordercialisjlp.com/?p=2081 complex, according to Design Collaborative’s Chief Cost Estimator Thad Berkes. Talk to one of our construction market experts and see how Dodge can sharpen your forecasts and help you grow.
Turner Building Cost Index rises as high-growth sectors drive activity in key markets.
- The near-term benefits come primarily from business incentives, including the qualified business income deduction, R&D expense provisions, and qualified opportunity zone renewals, though these last renewals-related construction projects won’t begin until 2027.
- Lokar encouraged businesses to be geographically specific in their planning, noting that population growth and regional dynamics will play a critical role in shaping demand.
- US government policy changes could usher in new opportunities and potential challenges for US manufacturing investment and global supply chains.
- Foreign-born workers constitute approximately 30% of the construction workforce nationally, according to statistics from the U.S.
An aging craft workforce, a thin pipeline of new entrants, demand concentrated in electricians, mechanical contractors, HVAC technicians, and pipefitters where the existing pool is smallest has and will continue to disproportionately impact the incoming pipeline. The commercial sector outlook is about on par with the broader industry, with a projected 1.5% increase this year rising modestly to 3.9% in 2026. AIA’s Kermit Baker says the consensus forecast predicts, “very modest growth, probably not even offsetting inflation, for the remainder of 2025 and into 2026, with particularly weak performance expected in commercial sectors outside of data centers, which are the only reason the office market shows any growth at all.”
Challenging material costs
The labor environment that owners bidding 2027 and 2028 projects will face is already visible in today’s supply-constrained markets. Dodge predicts multifamily starts will expand 6% to 640,000 units in 2025 and another 5% to 670,000 units in 2026, before pulling back through the remainder of the forecast period due to weaker demographic trends and reduced housing demand. After multifamily completions peaked in Q1 2024, planning activity has steadily increased, correlating with year-to-date growth in multifamily starts.
In August 2025, commercial and institutional planning activity increased by 30% year over year.14 Meanwhile, mid-market companies, which do not possess the scale or specialization to compete for large projects, are focusing on operational improvements, workforce development, and digital adoption to remain competitive. They are increasingly leveraging digital tools, modular construction, and strategic partnerships to manage complexity and scale. Many large E&C companies are reassessing their project portfolios to align with these new priorities, investing in capabilities to compete for mega-projects such as data centers and advanced energy facilities.
Construction Markets Still Progressing Forward
Like commercial construction (excluding data centers), institutional construction also remained “mostly flat” through most of 2024 and early 2025, according to Dodge, reflecting the broader pattern of businesses “sitting on their hands” and not actively planning new projects, though not completely abandoning planning either. However, netting out spending on data centers, spending on offices is expected to decline 3.6% this year, and another 2.0% next year, according to AIA Consensus Construction Forecast economists. Dodge’s Gaus notes that in 2025, “data centers eclipse office in terms of the value of starts of total office traditional office,” and data centers will significantly outpace office construction in 2026. ConstructConnect’s Michael Guckes notes that non-residential building faces particular challenges with a projected decline of 6.7% in the U.S. for next year, with manufacturing being a major factor in that weakness due to a projected decline in new manufacturing facility construction.
That urgency is most visible in sectors where demand is tied to capacity, resilience and mission-critical need. The Honouliuli WWTP Phase 1C – Headworks, HRBC, Solids Process and Miscellaneous Improvement project addresses long-term growth, resiliency, energy efficiency and environmental stewardship for the City and County of Honolulu. Public infrastructure, power and data capacity continue to progress, while financing-sensitive private development faces greater scrutiny. Halfway through the year, the 2026 construction market outlook is sending mixed signals.
Health care is specifically called out in Dodge’s report as one of the sectors experiencing the most acute project delays, among the worst affected alongside warehousing and manufacturing. While reasonably healthy growth is still expected, concerns are rapidly mounting. Unfortunately, more muted education, dormitory and transportation construction will offset growth in the other sectors. This year, even more large projects will start, including the second phase of the Rikers Island prison replacement and the Midtown Port Authority Bus Terminal Replacement in New York. Institutional starts were on a tear in 2024 with large projects in the health care, recreation, and transportation sectors pushing starts up 18% to $227 billion. In its Engineering & Construction Outlook, FMI Corp., https://uofa.ru/en/razvitie-russkoi-kultury-15-16-veka-russkaya-kultura-konca-xv—xvi-vekov/ a consulting and investment banking firm focused exclusively on the built environment, expects lodging to grow around 8% annually due to strong occupancy rates.
Nearly 92% of contractors report difficulty filling positions, which contributes to project delays and higher costs. Inflation has also made an impact on commercial construction with stalled growth due to high interest rates remaining volatile. These large projects are supporting nonresidential construction growth despite weakness in other sectors and are shifting labor toward major initiatives instead of other commercial developments. U.S. data center starts are up 15.1% year over year, driven by AI and cloud computing. Traditional commercial building has softened in some markets, while architecture and engineering remain steady.
Residential construction, particularly multifamily, will be a major driver supporting growth over the coming year. There’s more motivation by state and local governments to support these projects because they’re really supporting the economic health of an area. However, there are three major areas of concern regarding the outlook. Spending is still projected to increase 4.3% both this year and next, but there is a higher degree of uncertainty that will remain until final programmatic decisions are made.
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