✦ Quarterly forecasts across 22+ building types and nine U.S. regions Know where construction demand is heading by market, type, and territory Decades of verified construction starts by building type and geography to contextualize trends and validate strategy. Quarterly and annual forecasts by building type, material category, and territory, down to county level.

• For manufacturing, warehousing and health care, timelines have increased “from 20% to 25% longer,” potentially adding two years or more to the development process.
• More broadly, an immigration and enforcement environment that has reduced effective labor supply all compound a shortage the headline unemployment figures do not capture across sectors and trades.
• Public infrastructure, power and data capacity continue to progress, while financing-sensitive private development faces greater scrutiny.
• The aerospace and defense sector is entering a new phase of expansion, driven by advancements in AI, digital sustainment, and increasing demand across both commercial and defense markets
• Pass-through that was slow to materialize through 2025 is now reaching project estimates, as metals, lumber, and equipment pricing continue to reflect exposure across multiple tariff regimes.

Renewed strategic focus and targeted technology investments could be essential to maintaining a competitive edge in 2026 Access more insights for the aerospace & defense, chemicals & specialty materials, engineering & construction, mining & metals, oil & gas, power & utilities, and renewable energy sectors. The authors would like to thank Anuradha Joshi for her key contributions to this report, including research, analysis, and writing.

Persistent labor shortages, rising material costs, and economic uncertainty continue to challenge firms’ resilience. U.S. construction demand remains strong, driven by data centers, manufacturing, and semiconductor projects in the Midwest and Southeast. The occupations most exposed to wage escalation from existing shortages, including electricians, HVAC and https://compitionpoint.com/innovative-atlas-copco-solutions-for-modern-industry/ mechanical contractors, and equipment operators, are the same trades data centers and power infrastructure both require disproportionately.

Evolving tariffs: Building resilience against supply chain disruptions and rising material costs

The economic repercussions of labor shortages in E&C are already evident and expected to intensify (figure 3). The E&C industry is at a pivotal moment, facing surging demand across sectors like data centers, grid-modernization megaprojects, and advanced manufacturing.17 This growth, fueled by several major federal legislative initiatives and programs, along with strong private investment, presents significant opportunities and formidable challenges. He has over 20 years of experience in developing data-driven insights and translating complex market trends into compelling thought https://homesinteriornews.com/tips-for-maximizing-efficiency-with-equipment-rentals-in-construction/ leadership across multiple sectors and geographies. The Cost Index is determined by several factors considered on a nationwide basis, including labor rates and productivity, material prices and the competitive condition of the marketplace. The strongest recommendation is for teams to be disciplined during budgeting, design, and preconstruction, especially in how they track escalation forecasts, labor trends, material risks, and allowances. Commercial construction demand should remain strong through 2026, but companies should expect projects to be shaped by persistent escalation, labor shortages, tariffs, and supply chain disruptions.

Omaha Market Conditions Report Q4 2025

Despite all this, the outlook for 2026 is largely unchanged from what we reported in January 2025—challenging for U.S. construction, with reasons for optimism in the coming year. Experts urge firms to prioritize cost control, workforce upskilling, and automation to maintain competitiveness. US government policy changes could usher in new opportunities and potential challenges for US manufacturing investment and global supply chains. How can manufacturers harness agentic AI to help reshape their business and create value across their organizations?

Pass-through that was slow to materialize through 2025 is now reaching project estimates, as metals, lumber, and equipment pricing continue to reflect exposure across multiple tariff regimes. Final-cost indices including contractor margins are already running roughly 5% year-over-year, and acceleration is overdue for the second half of 2026. Construction Perspective mid-year update examines the escalation channels driving that position, the structural labor constraints compounding it, and where a procurement window still exists for owners prepared to act before it closes.

Additionally, Gaus observes increasing business travel as “more people are recognizing that getting together, whether in conferences or in-person meetings, the personal connections are really helpful to get through times of uncertainty.” This business travel growth might offset decreases in leisure tourism, he says. The hotel sector saw steep declines in spending in the early days of the pandemic, but an increase in travel has benefited the outlook for these facilities. 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. AGC’s Ken Simonson notes that the non-residential sector shows the most dramatic contrasts, particularly in office construction where he reveals that “apparent flatness in office construction is really made up of a 30% spike in data centers, a 17% decline in private office.” While some new construction continues in major cities, Gaus indicates it’s not “the vast majority of what we’re seeing.” Spending by building owners to make the space more desirable has spurred reconstruction spending, but not enough to offset the decline in new construction.

Labor constraints are structural, not cyclical, and geographically locked

“The additional complexity of AI-related infrastructure makes highly skilled and experienced instructors all the more valuable; the older skew of the workforce makes the timing challenge all the more acute.” The industry’s demographics pose an additional challenge as nearly one-fifth of the construction workforce is over 55. A separate report from BlackRock last month cited Labor Department forecasts that show employment in skilled trades will grow by 5.3% on average from 2024 to 2034 versus the overall rate of 3.1%. And since August 2024, nonresidential specialty trade contractors have added 95,000 jobs.

A $2.3 billion, 104-acre mixed-use development breaks ground south of Salt Lake City

• The strongest recommendation is for teams to be disciplined during budgeting, design, and preconstruction, especially in how they track escalation forecasts, labor trends, material risks, and allowances.
• Looking ahead to 2026, the outlook for commercial construction activity is cautiously optimistic, with data center and energy infrastructure expansion providing continued momentum.
• He has over 20 years of experience in developing data-driven insights and translating complex market trends into compelling thought leadership across multiple sectors and geographies.
• 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.

Much of that growth will be from continued strength in data center construction and groundbreakings on high-value megaprojects in select sectors. He also cautioned against expecting dramatic interest rate cuts in 2025, noting that government spending and rising debt levels are likely to fuel long-term inflation. He urged companies to digitize and embrace AI to stay competitive, develop inflation strategies that go beyond short-term fixes, focus on cost control and margin protection, especially in asset-heavy sectors, and plan for a pivot between 2028 and 2032, when demographic and fiscal pressures may reshape the landscape. The construction sector serves as a microcosm of broader economic trends. His forecast emphasized the importance of focusing on economic fundamentals and leveraging reliable forecasting tools that allow businesses to plan with confidence, even in a volatile environment. As economic uncertainty begins to fade, Connor Lokar of ITR Economics offered a data-driven perspective on what lies ahead.

In contrast, the multifamily sector shows more promise for 2025, driven by buyers priced out of single-family homes who are turning to rentals or more affordable townhouses and condominiums. As the housing shortage gradually resolves over the next five years, demand for new construction is expected to normalize, resulting in a relatively flat outlook for single-family starts. By Q1 2025, some markets—especially in the South and Midwest—have actually become oversupplied, as evidenced by rising inventories. In Dodge’s annual economic forecast, Eric Gaus revealed that the outlet has revised down its single-family housing forecasts considerably. While Simonson believes “we may be near the bottom on single-family and multifamily,” he notes that “30-year mortgage rates at 6.25% remain not low enough to bring first time home buyers back to the market,” suggesting “any recovery in residential will be pretty slow and modest.” AGC’s Ken Simonson predicts that residential construction faces continued headwinds, with single-family down 2%, multifamily down 9% and improvements down 8%.

Spending in the office category has been hampered by remote work that has produced national vacancy rates approaching 20%. For manufacturing, warehousing and health care, timelines have increased “from 20% to 25% longer,” potentially adding two years or more to the development process. Despite increased planning activity, Gaus identifies “a fairly large caveat”—project delays are increasing significantly and getting longer. Planning activity has increased, says Dodge’s Eric Gaus, who compares the sudden activity to wallflowers at a dance suddenly entering the dance floor. Further rate cuts from the Federal Reserve and stronger business and consumer spending in 2027 will drive the 7% acceleration over the year. Despite overall weakness, mega projects and data centers are creating a construction boom in specific segments.

According to AIA, the Consensus Construction Forecast economists predict that overall spending on nonresidential buildings not adjusted for inflation will increase only 1.7% this year and grow very modestly to just 2.0% next year due to high long-term interest rates, falling consumer confidence and labor shortages as factors limiting growth. Rising uncertainty around tariffs caused many business owners and developers to delay project decisions in the first half of the year, and continued uncertainty will continue to weigh on construction starts, according to economists of Dodge’s 2026 Outlook. Lokar highlighted the use of rates-of-change analysis, which helps define and anticipate shifts in the business cycle, offering early signals for strategic pivots. 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. Immigration policy shifts and aging workforce trends are tightening labor supply, while material costs continue to rise under aggressive trade policies. GDP growth for 2026 is projected at just 2.3%, signaling modest expansion amid fiscal challenges like rising deficits and debt.