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Contractors will have to rely on a known formula in 2026.
Over the past 12 months, construction activity was heavily supported by a small group of winning sectors. Tech giants pledged billions to expand their facilities data center footprints. Construction of public infrastructure, such as roads and waterworks, progressed despite general funding pressures.
Without these megaprojects, however, we wait construction activity as a whole slows downas he did in November. Still, demand in these areas remains strong despite common headwinds around labor and construction costs.
But for companies that can’t absorb it, these factors could put work aside. For this reason, awards in the right sectors will once again separate the contractors who are gaining ground from those who are just treading water.
Here are five construction industry trends that contractors will be aware of in 2026.
About the costs of the materials
Material prices are unlikely to crash or reset in 2026, construction professionals say.
Forecasts suggest that materials costs will inflate by about 2% to 4% this year, and labor costs still put much greater pressure on project budgets than materials, said Brad Werner, partner and national leader of the construction and real estate practice at Wipfli, a Milwaukee-based consulting firm. Cement and concrete prices appear largely flat, although steel and aluminum remain elevated due to tariff-related impacts.
Brad Werner
Courtesy of Wipfli
Prices for electrical equipment tied to grid upgrades and the artificial intelligence boom should also continue to fluctuate, said Eric Schmitz, senior vice president at Turelk, a Long Beach, Calif.-based general contractor.
“Prices went up sharply on rates and now they’re on a bit of a comeback,” Schmitz told Construction Dive. “We continue to inform our clients that rates can increase volatility and we, as contractors, include stronger escalation language.”
Construction inflows surged after the Liberation Day tariffs
Percentage change in the producer price index from January 2025 to September 2025
This view aligns with the experience of other contractors in the field. Alexis Leal, head of Florida operations at Shawmut, a Boston-based general contractor, said the tariffs had minimal impact in Florida in 2025, accounting for about 1 percent of total material costs. But the company remains proactive in sourcing products domestically when possible, or when the tariff rate is reasonable, Leal said.
“Despite any unforeseen geopolitical or international crises, I expect construction raw material prices to remain relatively stable through 2026, although the full effect of the tariffs has yet to increase their bottom line impact,” Leal said in an email to Construction Dive. “We identify early in the pre-construction phase which materials or products may be affected, allowing as much time as possible to turn around if necessary.”
However, the biggest unknown in 2026 is tariff policy itself, said Anirban Basu, chief economist at Associated Builders and Contractors. “It remains to be seen which level of the supply chain will bear the brunt of the higher costs,” he added.
In data centers
The data center construction boom shows no signs of slowing down in 2026, according to sources.
“We’re in the middle of a historic infrastructure cycle in the U.S., and data centers are one of the main drivers of it. Cloud and AI-related demand is keeping development at an aggressive pace, especially in markets where power and infrastructure are already in place.”
Sam Holden
Vice President and Account Manager at Skanska Advanced Technology
Hyperscalers are pushing to build billion-dollar facilities at pace, which is a huge boon for contractors with experience in this type of construction. Vacancy rates are at extremely low levels in the industry, a positive indicator for more construction activity next year, said James Bohnaker, senior economist at Cushman & Wakefield, a Chicago-based commercial real estate services firm.
James Bohnaker
Permission granted by Cushman & Wakefield
But energy availability could moderate the boost. After skyrocketing growth to 2025, the current data center pipeline stands at nearly three times the 2020 volume in terms of square footage, said Lisa DeNight, managing director and head of North American industry research at Newmark, a New York City-based commercial real estate advisory firm. While demand for these facilities remains high, this tension around energy availability could limit the number of new builds.
“We’re more likely to see a stabilization, not because of a lack of demand, which I anticipate will widen and intensify next year, but because of a confluence of constraints,” DeNight told Construction Dive. “Energy capacity, of course, but that’s compounded by land shortages, fiber access, permitting issues, community pushback, extended timelines for equipment and more.”
Lisa DeNight
Permission granted by Newmark
Energy-related components, including generation-to-transmission and interconnection timelines, will likely be a critical bottleneck, said Sam Holden, vice president and account manager at Skanska Advanced Technology, a Skanska-launched unit focused on high-tech and semiconductor manufacturing. At the same time, the limited capacity of skilled electrical and mechanical craft workers is becoming a determining factor as the scale of the project grows in 2026, he added.
With that in mind, builders with exposure to the space should expect to stay busy with data center projects in 2026.
“We’re in the middle of a historic infrastructure cycle in the US, and data centers are one of the biggest drivers of it,” Holden told Construction Dive. “Cloud and AI-related demand is keeping development at an aggressive pace, especially in markets where power and infrastructure are already in place.”
About infrastructures
Funding that is already locked in, along with a strong project pipeline, should bolster infrastructure construction activity in 2026, although the outlook becomes more complex as the year unfolds.
Infrastructure-related construction spending should remain strong through much of 2026, as the Infrastructure Investment and Jobs Act authorization does not expire until the end of the third quarter, Basu said. In major regional markets, the momentum also looks durable.
In South Florida, for example, capital improvement programs at Miami International Airport, Fort Lauderdale-Hollywood International Airport and the Port of Miami remain fully funded and on track to move forward, along with major road and bridge work tied to the Florida DOT, Shawmut’s Leal said. He doesn’t expect political or budget volatility to alter the pace of infrastructure work in the region next year.
Anirban Basu
Permission granted by ABC
The risk, Basu says, lies in the timing around the second half of 2026. If lawmakers don’t act on the reauthorization by the end of the year, the pace of new infrastructure awards could slow. This could lead to increased competition and smaller margins for infrastructure contractors, Basu said. Separately, the One Big Beautiful Bill introduces mid-2026 end dates for several Inflation Reduction Act incentives, meaning there will be downward pressure on clean energy projects throughout the year.
“While not the baseline projection, negotiations to reauthorize the IIJA could experience some political turbulence,” Basu said. “That would eventually have a knock-on effect on infrastructure spending, although I wouldn’t expect that dynamic to play out until the end of next year.”
About manufacturing
Investment in new growth has leveled off, but there are opportunities for contractors in manufacturing construction in 2026, industry sources said.
Rising costs and policies from President Donald Trump’s administration have challenged investment in certain areas of manufacturing construction, such as electric vehicle plants. That means a new broad wave of manufacturing construction is unlikely in 2026, Basu said.
But construction spending in the manufacturing sector will remain extraordinarily high due to ongoing megaprojects. Indeed, while momentum has slowed, that does not indicate a broad retreat from reindustrialization, DeNight said.
“The megaproject wave will continue,” DeNight said. “Some industries, such as electric vehicles, are recalibrating and pulling back from making new investments, where other industries such as semiconductors, defense and biomanufacturing are expanding investment.”
Many of these projects face the same power and land constraints that data centers do, with the addition of a greater focus on manpower, DeNight said. This means that while the projects will continue into 2026, the timelines for completion and site selection will change, he added.
That will lead to adjustments in how these projects are ultimately carried out, said Mike Fiore, U.S. industrial products M&A leader at PwC, a consulting firm. It will now focus more on campus expansions and supporting infrastructure that builds the ecosystem, he added.
“The initial rush of massive, one-off megaprojects has matured,” Fiore told Construction Dive. “Activity remains strong. It’s just taking a more measured approach and practical form that reflects labor availability and cost pressure.”
About interest rates
Contractors anticipate a lower interest rate environment in 2026, although firms accept that the impact will be delayed.
Residential construction is likely to respond first, Bohnaker said.
A broader improvement in manufacturing and commercial construction could also slowly materialize in 2026, said Margaret Rabba, vice president at Morningstar DBRS, a Toronto-based credit rating agency, although she noted that global U.S. trade policy remains a key source of economic uncertainty.
Margaret Sure.
Courtesy of Morningstar DBRS
“If rates continue to come down, we should see a modest rebound,” Rabba said. “We also expect ongoing reassessments related to longer-term projects that may have stalled due to uncertainty and pricing viability.”
Fiore added that smaller private industrial construction, particularly projects that were stalled due to funding constraints, may begin to fall by the wayside as capital becomes more accessible this year.
“The timing varies by industry and how far along a project is in permitting and design,” Fiore said. “Sectors that depend more directly on financing conditions could see movement sooner.”
