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It’s a great time to be a contractor with data center work. For everyone else, the picture is less sunny.
“This year has been particularly volatile,” Michael Guckes, chief economist at ConstructConnect, told Construction Dive. “The subcategories in which a company chooses to compete can be one of the most important factors in its present and near future success.”
Total construction begins to fall in August after a jump in large data center and manufacturing projects increased activity in July, according to the Dodge Construction Network. Guckes said the month-to-month gap has become a feature of the construction economy because of megaprojects.
Projects valued at more than $1 billion now consume about one in four dollars spent on non-residential construction, Guckes said.
“To a degree not previously experienced, traditional indicators are being influenced more by the timing and idiosyncrasies of major project construction than by broad economic indicators,” Guckes said. “These big projects are driving a lot of the volatility we’re seeing in the industry and partly why the indicators are pointing in different directions.”
For example, The construction portfolio recovered in Augustalthough contractors with data center awards still have substantially more work than those without. The dynamics show that large companies capable of winning megaprojects have fared better than smaller companies outside the boom.
Where there is activity
Much of the activity is focused on digital infrastructure and ancillary projects around the boom, said Juan Arias, national director of U.S. industrial analysis at CoStar.
“The construction market looks strong in areas connected to infrastructure, energy, advanced manufacturing and data centers,” Arias told Construction Dive. “Other segments contribute less to overall growth.”
In manufacturing construction, for example, total employment in the sector has declined from peaks in 2024 and 2025, according to Arias. However, in the digital part of the manufacturing sector, such as semiconductor projects, growth has picked up over the past year. Other areas of manufacturing construction, such as chemical and automotive production, remain below year-ago levels, he said.
“What stands out the most is the concentration of construction and manufacturing growth around digital infrastructure and energy-related investments,” Arias told Construction Dive. “Growth is primarily driven by investment linked to semiconductors, communications equipment, electronics, power infrastructure and data centers.”
Costs are a threat
But a couple of indicators offered possible warning signs in August.
Data center planning cooled month over month in August, according to Dodge Construction Network. Contractors also face a less favorable cost environment that economists expect to worsen later this year.
“The reuse time was not completely out of left field,” said Adam Raimond, director of programs at Gordian, a construction data provider based in Greenville, South Carolina. “[It] may be leaving some concerned where the continued activity will come from if not for data center growth.”
Construction input prices rose 1.2% month over month in August and are now up 8.9% from August 2025, according to an analysis by Associated Builders and Contractors. Metals and petroleum products posted some of the biggest year-over-year price increases. Switchgear and copper cable also saw significant increases.
“The overall health of construction right now doesn’t feel as stable as it did at the beginning of the year,” Raimond said. “So far, most of the year has seen continuous increases in costs across a number of sectors, so the instinct is to believe that it could continue to close out the year.”
Higher costs are high on the list of potential headwinds for contractors, including those with heavy backlogs, Guckes added.
“Margin protection is the key,” Guckes told Construction Dive. “Labor shortages, volatile material prices and supply chain difficulties are risks to project management and margins of success.”
