What to Expect in 2026

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In Brief:

Reconstruction initiatives and adaptive reuse are gaining momentum in a risky market.
Knowledge facilities and megaprojects are driving development, regardless of challenges in different sectors.
Companies should prioritize value management and strategic bidding to navigate 2026 efficiently.

As we method a brand new yr, the development financial system faces a well-recognized future: Uncertainty. Nonetheless, there are at all times brilliant spots to the unknown, in addition to loads of alternative. Specialists from ConstructConnect, the American Institute of Architects (AIA), and the Associated General Contractors of America (AGC) not too long ago got here collectively for the most recent Building Economic system Outlook, introduced by ConstructConnect News, to provide their insights on how issues are going within the building trade.

How is the development financial system doing general proper now?

Whereas the general financial system stays unsure, there’s some development anticipated within the close to time period. Right here’s a breakdown:

GDP Development: The U.S. financial system is projected to develop modestly in 2026, with long-term rates of interest remaining risky as a result of inflation issues.
Building Exercise: Reconstruction initiatives have gotten a bigger share of the market, pushed by growing older constructing inventory and financial volatility.

How has the financial system affected residential building?

Mortgage charges eased barely within the again half of 2025, however they’re nonetheless a barrier for a lot of hoping to purchase a home. Kermit Baker, Chief Economist with the AIA, introduced up a recent U.S. News survey that reported roughly 50% of potential patrons would re-enter the market if charges hit 6%.

Housing shortages persist, however revolutionary options are rising:

In October 2025, the U.S. Senate handed the ROAD to Housing Act, a invoice that directs HUD to develop greatest practices to supply municipal governments with choices to extend housing on the native stage.
Accent Dwelling Items, or ADUs, now account for almost half of recent single-family items in California That determine was solely 5% simply seven years in the past, based on Baker.
Office-to-residential conversions have added 10,000 housing items in New York’s Manhattan since 1992, with extra within the pipeline.

“This tempo of development goes to proceed,” Baker mentioned. “In actual fact, constructing conversions have been a very talked-about technique for creating housing alternatives in addition to for using underutilized buildings.”

How are labor and materials prices impacting the development financial system?

It is no secret that labor shortages and rising materials prices proceed to problem the trade.

In regard to labor and the workforce:

Construction wages are rising faster than the broader financial system, with will increase exceeding 4% yearly. AGC Chief Economist Ken Simonson says it is because corporations are paying extra money to get extra employees.
Job openings have dropped, however layoffs and quits stay low, signaling cautious optimism amongst corporations.

In line with Simonson, “Employees do not see a possibility by leaping to a different building agency or by leaving building for different industries. And all of that is in step with a survey that AGC accomplished this summer time about firms’ workforce expertise and expectations.”

In terms of building supplies:

Tariffs are driving up costs for key building inputs:

“Tariffs may help some manufacturers, and positively we have seen dramatic bulletins by some CEOs and even heads of state about investments that they will be making. However these usually lack specificity as to time, place, or goal,” Simonson mirrored. “In the meantime, different producers are holding off as a result of they wish to see what their aggressive place shall be as soon as they should pay tariffs on their very own inputs—not simply on the manufacturing building prices—and whether or not they’ll face retaliation or discrimination from international rivals.”

What sorts of building initiatives succeeded in 2025?

Not all areas of the development trade struggled this yr. Knowledge facilities and megaprojects, or people who value not less than $1 billion, are paved the way in 2025.

“Knowledge facilities stay resilient, whilst different personal sectors face challenges,” Christy O’Brien, Director of Content material Acquisition at ConstructConnect, famous.

Present statistics on knowledge facilities within the U.S.:

U.S. knowledge heart begins are up 15.1% year-over-year, pushed by AI and cloud computing demand. A “begin” is simply because it sounds, a building venture that has began or damaged floor.
2025 has been essentially the most energetic yr for knowledge heart initiatives, with over $400 billion in future initiatives already printed.

In his November 2025 Data Center Report for ConstructConnect Information, ConstructConnect Chief Economist Michael Guckes reported on 39 late-stage preconstruction initiatives being tracked by ConstructConnect. All had deliberate begin dates earlier than the tip of the yr, with a mixed price of $25.5 billion.

“Ought to all these initiatives break floor as anticipated, it might raise whole knowledge heart begins for the yr to over $58 billion, a determine that’s greater than double the 2024 document excessive. Moreover, it might additionally convey the 3-year compounded annual development charge (CAGR) of information heart begins spending to 98.7%,” Guckes wrote.

O’Brien is optimistic we’ll see these sorts of outcomes.

“I believe ‘knowledge heart’ is just like the buzzword of the day, and I believe it should stay a standout performer pushed by the relentless demand for AI. It is actually displaying no indicators of slowing for now,” she mentioned.

Present statistics on megaprojects within the U.S.:

By means of September 2025, megaprojects totaled $134 billion, a 47% improve over 2024.
These giant initiatives are driving development in nonresidential building, whilst different sectors sluggish.

Talking through the Building Economic system Outlook, Guckes mentioned, “Final yr was a document excessive, and this yr is blowing away final yr’s document highs. So the impact of megaprojects on building merely can’t be underestimated or underappreciated.”

What’s subsequent for the development financial system in 2026?

The development trade is in a little bit of a difficult spot proper now. Whereas development stays sluggish in some main sectors, specialists say there shall be some revolutionary alternatives for builders in 2026.

Listed here are some key takeaways to remember:

Reconstruction initiatives, together with office-to-residential conversions, are rising in significance.
Knowledge facilities and megaprojects will proceed to dominate, however questions stay about their long-term sustainability.
Companies should deal with value management and strategic bidding to guard revenue margins in a difficult atmosphere.

When requested about her outlook for subsequent yr, O’Brien mentioned, “Trying forward, I believe the important thing query I am taken with for subsequent yr is whether or not we’ll see a stabilization in borrowing prices and higher readability on the [U.S. international] commerce coverage. I believe these two components will seemingly decide whether or not we see a rebound in personal sector exercise or if this cautious method continues.”

Talking on reconstruction changing into a development, Baker mentioned, “The development market is absolutely unusually unbalanced at current. We’re seeing just a few sturdy sectors, however many of the core sectors we take into consideration are actually pretty weak. I believe there are extra alternatives within the reconstruction realm, significantly adaptive reuse and conversion of unutilized amenities. I believe the demand is there.”

Guckes is concentrated on prices.

“It’s displaying up within the knowledge all over the place that corporations have been sacrificing their revenue margins to assist maintain costs secure, however that’s solely a brief repair,” he mentioned. “So, for 2026, be ruthless in value management and just remember to’re bidding appropriately.

“I believe that’s going to be the most important problem for subsequent yr for lots of corporations.”

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