U.S. construction spending is projected to rise 1% in 2026, according to the latest North American Engineering and Construction Industry Overview released by FMI Corporation. While a 1% increase may seem modest, the figure masks significant variation across different construction sectors. Public infrastructure and nonbuilding structures are expected to lead growth, while several private segments continue to face headwinds. Understanding where the opportunities lie and where risks are concentrated is essential for builders planning their project pipelines, equipment investments, and workforce strategies for the year ahead. For additional perspective on how these trends shape business decisions, see What the 2026 Construction Outlook Means for Strategic.
The 2026 Construction Spending Landscape: A Modest Gain with Uneven Distribution
FMI Corporation’s annual industry overview provides one of the most thorough forward-looking assessments of construction spending in North America. The 2026 forecast calls for total U.S. construction put in place to increase 1% over 2025 levels. To put this in context, 2025 is expected to close approximately 1% below 2024 spending, meaning the industry is essentially stabilizing after a mild contraction. This stabilization, however, is not distributed evenly across construction categories. Some sectors are poised for robust gains while others face continued pressure from elevated interest rates, shifting demand patterns, and persistent labor shortages.
Chris Daum, President and CEO of FMI Corporation, noted that construction firms will need to evaluate their competitive positioning carefully as market conditions diverge by sector. The overall flat-to-slightly-positive outlook suggests that broad-based growth strategies may underperform, while targeted sector-specific approaches could yield better results. Firms that understand the nuances of each submarket will have a distinct advantage when bidding for work and allocating resources.
Key Macro Factors Influencing the Forecast
- Interest rate environment: Elevated borrowing costs continue to pressure private-sector construction, particularly commercial real estate and residential development. Developers are delaying projects where financing costs erode projected returns.
- Public funding commitments: Previously allocated infrastructure funding from federal and state sources is sustaining momentum in nonbuilding construction categories, insulating these segments from private-sector headwinds.
- Technology-driven demand: The rapid expansion of data center construction is reshaping nonresidential building activity, with spending in this niche growing 35% versus 2024. AI workloads and cloud computing are the primary demand drivers.
- Labor market constraints: Persistent workforce shortages are limiting the speed at which contractors can scale operations, even when project demand is strong. Skilled trades remain in critically short supply across most regions.
- Material cost stabilization: After several years of volatility, key construction material prices have stabilized, providing more predictable bidding conditions and enabling contractors to price work with greater confidence.
Nonbuilding Structures Lead Growth as Infrastructure Spending Sustains Momentum
Nonbuilding structures are projected to be the strongest-performing category in 2026, with spending expected to increase 4% over 2025. This category encompasses power generation facilities, water and wastewater infrastructure, environmental remediation projects, transportation systems, and other civil works that do not fall under traditional building classifications. The consistent performance of nonbuilding construction reflects the multiyear nature of infrastructure investment cycles, which tend to be less sensitive to short-term interest rate fluctuations than private building sectors.
Power and Environmental Projects Drive Nonbuilding Gains
The growth in nonbuilding spending is being driven primarily by projects that received committed funding in prior budget cycles. Power sector construction, including renewable energy installations such as solar and wind farms, natural gas peaker plants, and grid modernization initiatives, accounts for a significant share of the projected increase. Water supply and sewage disposal projects are also contributing meaningfully, with these segments having ranked among the strongest performers in 2025. Environmental remediation and conservation work add another layer of activity that is expected to continue through 2026 as federal infrastructure dollars flow to state and local agencies.
Top Performing Segments in 2025 Providing a Baseline for 2026
The construction segments that performed best in 2025 offer valuable clues about where spending momentum is likely to carry into 2026. Understanding these patterns helps contractors identify which project types will have the strongest pipeline in the year ahead:
- Sewage and waste disposal: Continued investment in environmental infrastructure, driven by regulatory mandates and population growth in suburban and exurban areas, keeps this segment on a steady upward trajectory.
- Water supply: Aging water systems across the United States require significant upgrades. Federal funding programs, including those under the Infrastructure Investment and Jobs Act, are accelerating project starts and sustaining contractor backlogs.
- Conservation and development: Flood control, ecosystem restoration, and land management projects are attracting sustained public and private investment, particularly in regions prone to extreme weather events.
- Religious structures: This segment showed surprisingly strong performance, driven in part by adaptive reuse projects that convert former retail spaces, schools, and other existing buildings into worship facilities. This trend reflects both demographic shifts and creative approaches to real estate utilization.
Nonresidential Building: Data Centers Reshape the Landscape While Traditional Segments Struggle
In the nonresidential building category, the standout story is the continued boom in data center construction. Spending on data center projects increased 35% compared with 2024 levels, and this trajectory is expected to remain strong through 2026. The growth is being fueled by the rapid expansion of cloud computing platforms, artificial intelligence workloads that require massive computational capacity, and the buildout of edge computing infrastructure to support low-latency applications.
However, outside of data centers, the nonresidential building market tells a more cautious story. Commercial office construction remains subdued as hybrid work patterns persist and companies reassess their space requirements. Retail construction is largely limited to renovation and repositioning projects rather than new ground-up development. Healthcare and education construction provide pockets of stability but are not sufficient to offset weakness in other commercial subsectors.
Sector-by-Sector Spending Comparison
The table below summarizes the expected 2026 spending trends across major construction categories based on FMI’s forecast data and related market intelligence:
| Construction Category | 2026 Outlook | Key Driver | Risk Level |
|---|---|---|---|
| Nonbuilding Structures | Strong (+4%) | Power, water, environmental projects with committed funding | Low |
| Data Centers (Nonresidential) | Very Strong (+35% vs 2024) | Cloud computing, AI, edge infrastructure demand | Moderate |
| Other Nonresidential Building | Flat to Slight Decline | Office/retail weakness offsets healthcare/education gains | High |
| Infrastructure / Public Works | Moderate Growth | Federal and state infrastructure funding programs | Low |
| Residential Building | Flat / Uncertain | Interest rate sensitivity, labor availability, material costs | High |
| Manufacturing / Industrial | Moderate Growth | Onshoring trends, factory expansions, automation investments | Moderate |
Understanding how these different market conditions affect project feasibility and profitability is critical for strategic planning. For builders looking to align their operational toolkit with the types of projects expected to dominate in 2026, exploring Essential Insights On 40 Construction Tools List With offers practical guidance on equipment selection across multiple construction categories.
Strategic Positioning for Construction Firms in a Divergent Market
With growth concentrated in specific sectors rather than broad-based, construction firms need to think strategically about where and how they compete. The following approaches can help builders navigate the uneven 2026 landscape and position themselves for success regardless of which sectors dominate in their region.
Diversification into Infrastructure and Public Works
Contractors who have traditionally focused on private commercial work may find that adding infrastructure and public works capabilities provides a valuable hedge against private-sector volatility. The stability of publicly funded projects, particularly in the water, wastewater, power, and transportation subsectors, offers a reliable stream of work even when private development slows. Prequalification for public projects can take six to twelve months, so firms should begin this process early if they plan to shift or expand their focus. Building relationships with state departments of transportation, municipal public works departments, and utility authorities is a worthwhile long-term investment.
Investing in Technology and Productivity
When overall market growth is modest, the firms that gain market share are typically those that can deliver projects faster, more safely, and with greater cost certainty. Technology adoption is a key differentiator that separates high-performing contractors from the rest of the field. Builders should evaluate investments in:
- Project management software for better scheduling, resource allocation, and team communication across distributed job sites
- Building information modeling (BIM) for improved design coordination, clash detection, and reduced rework during construction
- Automated and semi-automated equipment to address labor shortages and improve productivity on repetitive tasks
- Drones for site surveying, progress tracking, safety monitoring, and client reporting (Comprehensive Guide to 5 Ways Drones Are Revolutionizing)
- Data analytics platforms for more accurate estimating, bid optimization, and business intelligence
Workforce Development and Retention
Labor availability remains one of the most significant constraints on construction activity, and this challenge shows no signs of easing in 2026. Even in a market with modest overall spending growth, skilled workers remain in high demand across nearly every construction sector. Contractors should invest in apprenticeship programs that bring new talent into the trades, cross-training initiatives that make existing workers more versatile, and retention strategies such as competitive compensation, clear career pathways, and improved jobsite safety and working conditions. Firms that build a reputation as employers of choice will have a distinct advantage when bidding for work in growth sectors.
Project Lifecycle Management and Risk Mitigation
Effective management of the full project lifecycle becomes even more important when margins are tight and market conditions vary across sectors. From preconstruction planning through closeout, every phase presents opportunities to control costs, reduce risk, and improve project outcomes. A thorough understanding of Key Facts About Construction Project Life Cycle Phases provides a framework for maintaining profitability in a flat-growth environment where winning competitive bids depends on both accuracy and efficiency.
Preconstruction Planning
- Invest more time in accurate estimating and value engineering to submit competitive yet profitable bids
- Engage subcontractors early to lock in pricing and confirm availability before committing to hard bids
- Conduct thorough site assessments and geotechnical investigations before finalizing proposals
- Review project specifications carefully for potential ambiguities or conflict points that could lead to change orders
Execution and Monitoring
- Implement weekly progress reviews with clear key performance indicators tied to schedule and budget
- Use real-time cost reporting tools to identify and address overruns before they compound
- Maintain flexible resource allocation to pivot between projects as site conditions and priorities change
- Conduct regular safety audits to prevent incidents that could derail project timelines
Closeout and Lessons Learned
- Document project data systematically to build a knowledge base that improves future estimating accuracy
- Conduct post-project reviews with the full project team to capture lessons and refine processes
- Build lasting relationships with owners and operators in growth sectors to secure repeat business and referrals
- Maintain thorough as-built documentation that protects against warranty claims and supports future service work
The 1% growth forecast from FMI Corporation signals an industry that is stabilizing after a mild contraction rather than entering a new boom cycle. The real story lies beneath the headline number: infrastructure and nonbuilding structures offer reliable opportunity, data center construction continues its explosive growth trajectory, and traditional private commercial segments face ongoing challenges that may persist for several more quarters. Builders who align their strategies with these sector-specific conditions, invest wisely in technology and workforce capability, and manage project lifecycles with discipline will be best positioned to thrive in 2026 regardless of which direction the broader economy moves.