Construction activity in 2026 is becoming increasingly selective as owners prioritize projects tied to critical infrastructure, operational resilience, and long-term capacity. According to Hensel Phelps' latest market outlook, investment continues in essential sectors while projects with greater scheduling flexibility face heightened financial and market scrutiny.
The assessment indicates that project urgency, rather than overall market demand, is becoming the primary factor influencing construction decisions.
Hensel Phelps identifies water and wastewater systems, power infrastructure, data centers, defense facilities, and other mission-critical developments as the strongest-performing construction sectors.
Projects supporting operational continuity, regulatory compliance, resilience, and strategic infrastructure continue to move forward despite ongoing market pressures.
The company also highlighted a confidential data center campus where it delivered standalone water and wastewater infrastructure using a construction manager at risk (CMAR) delivery method. The infrastructure was designed to support both immediate operational needs and future campus expansion through scalable water supply, wastewater treatment, and reuse systems.
The market outlook notes that privately financed developments are facing greater challenges as higher borrowing costs, tighter lending standards, and increased scrutiny from financial institutions affect investment decisions.
At the same time, rising construction material prices and continued shortages of skilled labor are increasing project costs. Competition for specialty trades has intensified as data centers, semiconductor manufacturing, and advanced industrial facilities continue to expand.
These market conditions are prompting many owners to reassess project scope, sequencing, procurement strategies, and construction schedules before committing capital.
Hensel Phelps emphasizes that early planning has become increasingly valuable in helping owners manage uncertainty before construction begins.
The company points to integrated preconstruction services including site selection analysis, constructability reviews, cost modeling, schedule development, procurement planning, safety coordination, and regulatory compliance as tools that can improve project predictability and reduce delivery risks.
For construction owners, developers, and contractors, the 2026 market reflects a growing divide between essential infrastructure projects and discretionary development. Organizations investing in mission-critical facilities continue to generate construction opportunities, while projects dependent on private financing require more rigorous planning and risk management. Early collaboration and detailed preconstruction analysis are becoming increasingly important as owners seek greater certainty around cost, schedule, labor availability, and procurement.
Source: Hensel Phelps.
