The surge in data center construction continues to be at the forefront of the industry as other sectors struggle to catch up. Meanwhile, labor and material price issues persist.
“What we’re seeing in our third-quarter data is an industry navigating a complex two-speed market,” said Paul Brussow, president of Rider Levett Bucknall North America. “While residential activity is cooling, non-residential construction remains exceptionally strong, with jobs up 2.6 percent over the past year.”
Dodge Construction Network reports that total construction starts were up 17% year-to-date for the first seven months of the year. The big increase “is being driven primarily by data center and institutional planning,” says Sarah Martin, Dodge’s director of economic research. “Projects continue to move through the planning process more slowly along with labor constraints and uncertainty about project costs. In July, non-residential projects took an average of 17 months to move from planning to start, compared to 16 months in July 2025.”
Residential starts declined 2% through July compared with the same period last year, according to data from Dodge. Single-family starts, with a 6% drop, are the cause of the decline, while multi-family starts have increased by 6%.
The largest multifamily projects breaking ground in July were the $535 million NY Vue-Harbor Station South Residential Tower/Retail in Bayonne, NJ and the $343 million ICON Beach Waterfront Condominiums in Hollywood, Florida. “As a result, demand has remained strong for more affordable rental units, as well as townhomes and condominiums.”
Non-residential starts are up 22% over the same time period. Unsurprisingly, office starts, which include data center work, are the catalyst for the increase, up 118% year-to-date. Car parks also experienced growth, at a rate of 10%. July’s largest non-residential projects were the $12.8 billion data center portion of Project Jupiter Data Center and Microgrid Phase 1 in Santa Teresa, NM, and the $12 billion Micron Semiconductor Mega-Factory Fab 1 – Phase 1 in Clay, NY. he says
On the other hand, “increased volatility in global supply chains and labor availability weighed on warehouse construction, which fell 9% in the first seven months of the year,” he says. Retail and hotel starts are also down from last year, as are starts in the institutional sector, which includes education and healthcare. “Reduced access to federal funding, tighter state and local budgets, and ongoing labor and material pressures are weighing heavily on publicly funded construction activity.”
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“Strong domestic investment in AI, energy and infrastructure is expected to sustain growth in the construction sector, despite geopolitical uncertainty.”
Sarah Martin, Director of Economic Research, Dodge Construction Network
In the non-building sector, starts are up 30% from last year in the first seven months, due to strong results in utilities, streets and bridges and various non-building categories. That market, boosted in recent years by federal funding, is expected to cool as funding from the Jobs and Infrastructure Investment Act (IIJA) expires in September.
In July, the largest nonbuilding projects to begin work included the $2.4 billion CHSRA New Track and Systems (two sections) in Bakersfield, Calif., and the $2.3 billion microgrid portion of the Jupiter Data Center Project and Microgrid Phase 1 in Santa Teresa, NM.
“The macro economy remains more resilient than expected, but construction faces downside risks from inflation, political uncertainty and uneven demand across regions and building types,” says Martin. “Strong domestic investment in AI, energy and infrastructure is expected to sustain growth in the construction sector despite geopolitical uncertainty, although this growth will be uneven.”
Lumber prices are expected to increase during the third quarter. “U.S. Lumber Spot Prices and Firmer Pricing Conditions [are expected] “In the major wood-producing regions,” says Ashika Jugwanth, research analyst at S&P Global Market Intelligence. “Canadian softwood lumber prices are expected to post particularly strong gains, while U.S. lumber prices are also rising.”
Plywood prices are expected to rise 3.9% for the year, with softwood lumber prices forecast to rise 4.8%, according to S&P Global Market Intelligence’s third-quarter forecast. After the hike in the third quarter, Jugwanth is looking for lower prices in the fourth quarter.
“Looking ahead, price growth is expected to moderate in 4Q 2026 as recent spot market gains begin to stabilize and construction demand remains relatively subdued. Ongoing trade policy uncertainty, including tariffs on imported wood products, may contribute to localized price volatility, but the broader forecast points to generally stable lumber markets through the end of the article,” he says Ju2202.
In the steel market, carbon steel prices are “very high,” says John Anton, director of pricing and purchasing at S&P Global Market Intelligence. However, “there are tentative signs that buyers may be getting relief,” he says. “Imports of rebar are increasing but not extreme, resulting in one of the lowest prices of all steel products, although well above historical norms.”
S&P forecasts carbon steel prices to rise 20.9% by the end of 2026 before falling 9% in 2027. For rebar, a 13.4% increase is forecast for this year, with a 6.7% decline next year.
