As construction firms enter 2026, the industry is once again relying on a familiar formula: follow the money, manage volatility, and focus on sectors with durable demand. While overall construction activity slowed at points in late 2025, momentum remains concentrated in a handful of resilient markets, including data centers, public infrastructure, and select manufacturing megaprojects.
Absent those large-scale investments, broader construction growth would likely soften. Still, contractors positioned in the right sectors are expected to stay busy, even as labor shortages, tariff uncertainty, and financing constraints continue to pressure margins. Industry analysts say the difference between growth and stagnation in 2026 will come down to sector exposure and risk management.
Below are five trends construction firms are closely watching in the year ahead.
Construction material prices are expected to rise modestly in 2026, with most forecasts projecting 2% to 4% inflation, far below the volatility seen earlier in the decade. Labor costs, however, continue to exert greater pressure on project budgets.
“Prices rose sharply on tariffs and are now in a bit of a give back,” said Eric Schmitz, senior vice president at Turelk. “We continue to advise our clients that tariffs can increase volatility and we as contractors are including stronger escalation language.”
While cement and concrete pricing remains relatively flat, steel and aluminum prices remain elevated, reflecting ongoing tariff-related impacts. Electrical equipment tied to grid modernization and artificial intelligence demand is also expected to fluctuate.
“Notwithstanding any unforeseen geopolitical or international crises, I expect construction commodity prices to remain relatively stable through 2026, although the full effect of tariffs has yet to rear its final impact,” said Alexis Leal, head of Florida operations at Shawmut. “We identify early on in the preconstruction phase which materials or products may be impacted allowing for the maximum amount of time to pivot if necessary.”
The largest wildcard, according to economists, remains trade policy.
“It remains to be seen which level of the supply chain will bear the brunt of higher costs,” said Anirban Basu, chief economist at Associated Builders and Contractors.
The data center construction boom shows little sign of slowing in 2026, driven by surging demand for cloud computing and artificial intelligence infrastructure. Hyperscale developers continue to push billion-dollar facilities, particularly in regions with established power and transmission capacity.
“We’re in the middle of a historic infrastructure cycle in the U.S., and data centers are a major driver of it,” said Sam Holden, vice president and account manager at Skanska Advanced Technology. “Demand tied to cloud and AI is keeping development at an aggressive pace, particularly in markets where power and infrastructure are already in place.”
Vacancy rates remain exceptionally low, signaling continued construction demand. However, power availability, land scarcity, permitting delays, and community opposition are emerging as limiting factors.
“It’s more likely we see a stabilization, not due to lack of demand, which I anticipate expands and intensifies next year, but because of a confluence of constraints,” said Lisa DeNight, managing director at Newmark. “Power capacity, of course, but that is being compounded by land scarcity, access to fiber, permitting issues, community pushback, elongating timelines for equipment and more.”
Infrastructure construction should remain strong through most of 2026, supported by funding already authorized under the Infrastructure Investment and Jobs Act, which does not expire until late in the third quarter.
In markets such as South Florida, large airport, port, and highway projects remain fully funded and on schedule, according to regional contractors.
The risk, however, lies later in the year.
“While it’s not the baseline projection, negotiations to reauthorize the IIJA could certainly experience some political turbulence,” said Basu. “That would eventually have a deleterious effect on infrastructure spending, though I would not expect that dynamic to surface until the very end of the year to come.”
Additional uncertainty stems from mid-2026 sunset dates tied to Inflation Reduction Act incentives, which could place downward pressure on clean energy projects.
While the rapid surge in manufacturing investment has cooled, construction activity in the sector remains elevated due to ongoing megaprojects. New investments tied to electric vehicle manufacturing have slowed, but other sectors continue to expand.
“The megaproject wave will continue,” said DeNight. “Some industries such as EVs are recalibrating and pulling back from making new investments, where other industries such as semiconductors, defense and biomanufacturing are expanding investment.”
Labor availability, power access, and land constraints remain critical challenges, influencing both site selection and project timelines.
“The early rush of massive, one-and-done megaprojects has matured,” said Mike Fiore, U.S. industrial products M&A leader at PwC. “Activity is still strong. It is simply taking a more measured approach and practical form that reflects labor availability and cost pressure.”
Most contractors expect interest rates to ease in 2026, though the impact will unfold gradually and unevenly across sectors. Residential construction is likely to respond first, followed by commercial and manufacturing projects that were previously stalled due to financing challenges.
“If rates continue easing, we should see a modest rebound,” said Margaret Rabba, vice president at Morningstar DBRS. “We also expect ongoing reassessments related to longer-term projects that may have been stalled due to pricing uncertainty and feasibility.”
Smaller private industrial projects, in particular, may begin to move forward as capital becomes more accessible.
“The timing varies by sector and by how far along a project is in permitting and design,” said Fiore. “Sectors that rely more directly on financing conditions could see movement sooner.”
Taken together, these trends suggest a year defined less by broad-based growth and more by strategic positioning. Contractors with exposure to data centers, infrastructure, and select manufacturing segments are expected to outperform, while firms heavily dependent on discretionary private development may face headwinds.
As 2026 unfolds, volatility around tariffs, power availability, labor capacity, and federal policy will continue to shape which projects move forward — and which remain on the sidelines.
Originally reported by Sebastian Obando, Reporter in Construction Dive.
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