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. Yet, not all segments are slowing—data center construction is booming, with growth exceeding 40%, making it a bright spot for investment and development. Lokar’s message is clear—don’t let headlines and political distractions cloud your strategic vision. As economic uncertainty begins to fade, Connor Lokar of ITR Economics offered a data-driven perspective on what lies ahead.

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.” 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. For manufacturing, warehousing and health care, timelines have increased “from 20% to 25% longer,” potentially adding two years or more to the development process. 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. Business investment in construction structures is projected to pivot from a 2025 decline in funding to modest growth (nearly +1.8%) in 2026, with AI-related data center outlays continuing to support engineering and construction work.

More and more construction industry participants will have to start using tech advancements like IoT in their building materials. That figure could rise above $3 trillion by 2030, with a projected CAGR of 29.4%. It’s estimated that the global smart city market is worth $877.6 billion. One of the biggest trends affecting the construction industry is the rise of smart cities.

• As E&C firms plan for digital initiatives through 2026, technologies like cloud-native digital twins and AI agents are expected to become standard.
• 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.
• This chart is for illustrative purposes; the full report contains the complete analysis.
• Per the Harvard Business Review, AI has led to a flood of VC investment in construction tech, outpacing the overall VC indsutry 15-fold.
• 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.

Key Players In The Global Construction Market

AI-driven tools will optimize designs, automate calculations, and manage schedules in real time, enabling smarter and faster project outcomes. Although the E&C industry has historically been conservative in adopting new digital technologies, AI is expected to drive a profound transformation over the next few years. As E&C firms plan for digital initiatives through 2026, technologies like cloud-native digital twins and AI agents are expected to become standard.

“We’re seeing a long-term slowdown in employment in the construction industry,” says Dodge’s Gaus. Beyond construction specifically, Dodge says increased ICE enforcement has significantly altered projections for household formation, which has been primarily driven by immigrant rather than domestic population growth. 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. 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. Long-term interest rates remain stubbornly high, inflation rates have stalled, home building activity levels remain disappointing, tariff rates for construction continue to rise and shift, and construction labor shortages have grown due to restrictive immigration policies.

• The Performance chapter covers detailed analysis, datasets, detailed current performance, sources of volatility and an outlook with forecasts for the Construction industry in the United States.
• Unfortunately, more muted education, dormitory and transportation construction will offset growth in the other sectors.
• US government policy changes could usher in new opportunities and potential challenges for US manufacturing investment and global supply chains.
• This chart is for illustrative purposes; the full report includes a detailed competitor analysis and comprehensive overview of the top 10 companies in the market.

• But NEOM will apparently focus on “5G hyperconnectivity, AI and advanced robotics, augmented and virtual reality, and purpose-built data centers.”
• That figure could rise above $3 trillion by 2030, with a projected CAGR of 29.4%.
• This is an illustrative chart; the full report provides a complete and accurate competitive analysis.
• Additionally, the migration of engineering talent to technology firms—driven by demand for tech-enabled skills—is intensifying competition for skilled workers.25
• The construction industry responded effectively to the shortage, particularly in the South, building “tons and tons of houses,” says Gaus.

Institutional sectors like health care and education show resilience, though demographic and funding challenges temper long-term outlooks. US government policy changes could usher in new opportunities and potential challenges for US manufacturing investment and global supply chains. BCIS produces five-year construction industry forecasts, covering projected costs, tender prices and output, and examining the latest construction market trends. 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. In http://www.911fsa.org/energy-conservation.html 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. ConstructConnect’s Michael Guckes reported that data centers have “doubled almost every year since 2021,” growing from $7 billion in 2022 to $32.9 billion through September 2025, with potential for “yet another year of doubling growth.”

Advanced manufacturing, health care, and defense activities hinted at selective growth opportunities.3 Investment in structures is projected to pivot from a 2025 decline to modest growth (nearly +1.8%) in 2026, with AI-related data center outlays continuing to support engineering and construction (E&C) work.4 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. Here’s a breakdown of the most recent Cyber Monday, including the latest discount and shopping trends. Overall, environmental sustainability and software adoption seem to be the overriding themes that tie many of these trends together.

Cement production alone accounts for 8% of global CO2 emissions. The number of new buildings being built also isn’t expected to slow anytime soon. And embodied carbon (carbon released in the construction process) accounts for close to 30% of greenhouse gas emissions in the construction and real estate sectors. The entire construction supply chain accounts for 11% of global greenhouse gas emissions. Searches for “living building material” have increased by 76% over the last 5 years. One of the most radical new trends in the construction industry is the use of living building materials.

For a sector where financing conditions shape both development decisions and project viability, that represents a significant change in the outlook in a short space of time.’ On the input costs side, the BCIS General Building Cost Index (GBCI) increased by 1.4% between 1Q2026 and 2Q2026, resulting in annual growth of 3.8%. The BCIS TPI panel reported that low activity levels are offsetting the inflationary pressures on input costs, with any price increases arising from recent geopolitical developments expected to materialise later rather than immediately. The BCIS All-in Tender Price Index (TPI), which measures the trend of contractors’ pricing levels in accepted tenders, i.e. the cost to client at commit to build, increased by 1.0% in 2Q2026, resulting in annual growth of 3.2%. Planning data shows multifamily will remain strong through the rest of 2025 and into 2026. 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.

The single-family housing market faced significant headwinds in 2025, with construction remaining underwhelming due to persistent affordability challenges. AGC’s Ken Simonson predicts that residential construction faces continued headwinds, with single-family down 2%, multifamily down 9% and improvements down 8%. However, Gaus notes that single-family housing “has been coming down quite a bit throughout the year,” while multifamily “has remained relatively strong” with good pipeline indications continuing into 2026. Residential construction, particularly multifamily, will be a major driver supporting growth over the coming year.

ICON, a company that constructs homes using 3D printing, built a 650-square-foot home in 24 hours at a cost of $10,000. One commercial building was built in Dubai using 50% less labor than a typical building. The company reports that its projects reduce construction timelines by up to 75%. Mighty Buildings has several home layouts including this small dwelling, a 1,100-square-foot option, and a 2,000-square-foot home. The company built its Mighty Duo B, a 700-square-foot 3D prefabricated home, in just eight weeks. The construction industry stands to reap several benefits from 3D printing.

Construction Robotics and Automation Enhance Productivity

Despite overall softness, data center construction is booming—up 33% in 2025 and projected to grow another 20% in 2026—driven by AI demand. GDP growth for 2026 is projected at just 2.3%, signaling modest expansion amid fiscal challenges like rising deficits and debt. The U.S. construction industry faces slowing economic momentum, high interest rates, and tariff uncertainty. The authors would like to thank Anuradha Joshi for her key contributions to this report, including research, analysis, and writing. Additionally, the migration of engineering talent to technology firms—driven by demand https://dominicandesign.net/the-cheapest-house-with-your-own-hands.html for tech-enabled skills—is intensifying competition for skilled workers.25