2026 Forecast: Megaprojects, Data Centers Spur Growth Amid Shifting Policies

Following a year of uncertainty in the economy, experts expect much of the same for the construction industry heading into 2026.

“There is this sort of general unease” when looking at the next one to two years, says Jay Bowman, partner at FMI Consulting. “I understand that to a degree but at the same time, [contractors are] expressing all this concern, yet their backlogs in many cases are the best they’ve ever been. [So] there’s a little bit of a disconnect.”

FMI is forecasting that spending for total construction put-in-place will decline 1.4% in 2025, before rebounding slightly, at a rate of 0.7%, in 2026. Total residential put-in-place follows a similar trend, expected to drop 2.2% in 2025, then increase 0.7% in 2026. In the non-residential market, declines are predicted in both 2025 and 2026, at a rate of 2% and 0.5%, respectively. “This year was a soft year,” says Bowman, but anticipates 2026 will be “a soft blend, where [things steady] for contractors.”

Dodge Construction Starts Forecast: 2026 ($BIL)

FMI Construction Put-In-Place Forecast: 2026 ($BIL)

Data centers continue to drive a significant amount of market growth. Following a substantial 55.7% spike in 2024, FMI forecasts data center construction to increase 24.9% in 2026, following a 33.4% increase in 2025. “Obviously, data centers [are] becoming a larger and larger piece of the market,” Bowman says, adding, “I think we’re starting to get near a peak from a growth perspective. We’ve seen some states and municipalities starting to push back against data center development … [by eliminating] tax incentives. I’m not trying to say data centers are going away, [but] it’s not going to be this never-ending growth.”

Manufacturing also may be reaching a high point. “We saw that huge ramp-up in manufacturing over the last five years,” Bowman says, noting that FMI’s put-in-place forecast in this market is expected to reach $225 billion by the end of 2025, a major contrast to 2020’s $75 billion. Going forward, Bowman expects spending in the sector to stay largely flat when compared to the huge spikes seen in the past few years. The FMI forecast predicts a dip of 4.7% in 2025, followed by a 3.7% decline in 2026.

Michael Guckes, chief economist at ConstructConnect, shared a similar sentiment regarding manufacturing. “The outlook is… uncertain. ConstructConnect anticipates a modest tailwind from an improving interest rate environment and a stronger tailwind from the One Big Beautiful Bill Act. However, an evolving trade policy landscape is creating hesitation among manufacturers considering major domestic investments.”

Guckes notes the current challenge to the manufacturing sector “is one of timing and policy durability. Manufacturing facilities typically require multi-year construction timelines and even longer payback periods to achieve profitability targets,” he says. “Firms evaluating large capital expenditures today must weigh the current tariff environment against the possibility of policy shifts in future administrations as soon as 2029.”

He adds: “If trade policies become more permissive toward imports after 2029, plants being built under today’s tariff structure could face renewed competition from overseas manufacturers, potentially undermining their financial projections. This policy uncertainty—rather than current economic conditions—is tempering our manufacturing construction outlook for 2026, as firms adopt a wait-and-see approach to major capital commitments.”

Dodge Construction Network forecasts a 6.1% increase in the total dollar value of overall construction starts in 2025, before dropping 0.4% in 2026. “Megaprojects, led by data centers, will keep construction activity afloat next year, but persistent downside risks will limit the overall outlook,” says Sarah Martin, associate director of forecasting at Dodge.

“An evolving trade policy landscape is creating hesitation among manufacturers considering major domestic investments.”

-Michael Guckes, Chief Economist, ConstructConnect

On the non-residential side, spending is expected to rise 3.7% by the end of this year, and another 1.3% next year. “Commercial construction in 2026 will lean on data centers for growth, as cautious consumers and tighter lending constrain retail, warehouse and hotel projects,” Martin says. “Education building will remain weak, pressured by federal funding risks, higher endowment taxes and weaker demographics.”

While education is forecast to fall 4.1% in 2026, health care is predicted to rise 17.3% next year. “Rising health care demand and costs will continue to drive hospital construction.”

In the residential market, Dodge forecasts an overall increase of 1.7% in 2026, spurred by multifamily work, for which demand remains “robust,” says Martin. Single-family construction, however, “continues to face hurdles.” Dodge predicts a 9.5% decline in single-family construction in 2025, with an additional 1.9% drop in 2026. “While mortgage rates have ticked down recently, the elevated risk of recession and ongoing economic uncertainty is keeping homebuyers on the sidelines.”

Dodge forecasts overall non-building construction spending will be up 17.6% by the end of 2025, falling 4.4% next year. Highway and bridge construction is the strongest within the sector, and will continue to grow due to funds from the Infrastructure Investment and Jobs Act through 2026. “Rising demand for power generation, especially from data centers and high-tech manufacturing, will sustain activity in this sector,” says Martin. “Meanwhile, funding cuts to the EPA and U.S. Army Corp of Engineers along with the expiration of renewable tax credits will drag on the clean energy sector.”

“Megaprojects, led by data centers, will keep construction activity afloat next year, but persistent downside risks will limit the overall outlook.”

-Sarah Martin, Associate Director of Forecasting, Dodge Construction Network

Looking ahead, Martin points to continued uncertainty arising from tariffs and other federal policies as “the biggest threat” to the economic outlook. “Amid heightened volatility, consumers and businesses pause decision making. However, they can only sustain such pauses as long as their financial positions remain strong,” she warns, adding, “While, in aggregate, both consumers and businesses remain in decent financial shape, there is a distribution in financial strength that will be increasingly revealed and tested should policy uncertainty linger.”