As 2026 unfolds, the construction industry is relying on a familiar playbook, leaning heavily on a narrow group of high-stakes sectors like massive data center buildouts and public infrastructure to sustain momentum. Without these megaprojects, overall construction activity would face a broader slow-down. However, firms securing work in these vital areas must still grapple with persistent headwinds, including skilled labor shortages, rising building costs and tariff policy uncertainties.
Material costs are projected to see a modest inflation of roughly 2% to 4% this year. While standard materials like cement and concrete remain relatively flat, tariff-related pressures continue to keep steel, aluminum, and electrical equipment prices elevated. Tariffs remain a wild card, and while some contractors like Shawmut are proactively sourcing materials domestically when feasible, the broader supply chain still faces the lingering risk of volatility. Meanwhile, labor costs continue to exert far greater pressure on project budgets than materials alone.
Sector-specific dynamics are defining the landscape. The data center boom is driving development at an aggressive pace, propelled by hyperscalers racing to meet cloud and AI demands. Yet, this sector faces a looming bottleneck: power availability, land scarcity, and permitting issues are increasingly capping how fast new facilities can rise. Infrastructure construction remains robust, supported by locked-in funding under the Infrastructure Investment and Jobs Act (IIJA), though political turbulence and potential reauthorization hurdles late in the year introduce some caution.
Manufacturing construction also has leveled off from its initial hyper-growth phase, shifting toward a more measured approach centered on semiconductors, defense, biomanufacturing and essential campus expansions rather than massive, one-off electric vehicle projects.
Finally, a shifting interest rate environment offers a glimmer of relief. Contractors anticipate lower rates will gradually ease financial constraints, with residential construction likely responding first, followed by a slower, anticipated rebound in stalled commercial and industrial projects as capital becomes more accessible.