The construction industry enters 2026 on a note of cautious optimism, with FMI Corporation projecting a modest 1% increase in total construction spending compared with 2025. The forecast, detailed in FMI’s 2026 North American Engineering and Construction Industry Overview, signals a slow but steady recovery after a contraction in 2025. For builders, contractors, and industry stakeholders, understanding the nuances behind this projection is essential for strategic planning in the year ahead. For additional context on broader industry growth trends, see a Guide to What Are the Reasons Behind the shifting dynamics in global construction markets.
Understanding the 1% Growth Forecast: What the Numbers Reveal
FMI Corporation’s annual industry overview provides one of the most closely watched benchmarks for construction spending across North America. The 2026 edition forecasts total U.S. construction put in place to rise 1% year over year, following a 1% decline in 2025 relative to 2024 levels. While the turnaround is welcome, the modest pace reflects ongoing headwinds across several key sectors that continue to constrain more aggressive expansion.
The 2025 Baseline and the Path to Recovery
The 1% dip in 2025 was driven by multiple factors, including elevated interest rates, persistent labor shortages, and material cost volatility that slowed project starts throughout the year. Private nonresidential sectors felt the brunt of these pressures, with several categories experiencing delayed or canceled projects. However, the projected 1% recovery in 2026 suggests the industry is absorbing these shocks and beginning to stabilize, albeit at a measured pace that requires patience from stakeholders.
Key indicators supporting the recovery include:
- Stabilizing interest rate expectations as the Federal Reserve signals a pause in its tightening cycle
- Continued federal infrastructure funding flowing through previously authorized programs such as the IIJA
- Growing private investment in data centers and energy infrastructure driven by technology sector demand
- Improving supply chain conditions for construction materials and equipment after years of disruption
Uneven Growth Across Sectors
A critical finding from the FMI report is the uneven nature of projected growth. Public and infrastructure-related work is expected to provide relative stability, while several private sectors face continued pressure. This divergence means that strategic positioning will matter more than ever for construction firms planning their 2026 pipelines. Firms that bet on the wrong sector mix may find themselves chasing a shrinking pool of opportunities, while those aligned with growth sectors will enjoy stronger demand and healthier margins.
For a deeper look at how these sector dynamics affect builders, see What the 2026 Construction Outlook Means for Strategic Builders navigating flat spending and sector-specific conditions.
Nonbuilding Structures and Infrastructure: The 4% Growth Driver
One of the brightest spots in the FMI forecast is nonbuilding structures, which are projected to increase 4% in 2026. This category encompasses power plants, water and wastewater facilities, transportation infrastructure, and environmental projects with committed funding. The 4% growth in this segment significantly outperforms the overall market average, making it an attractive focus area for construction firms seeking reliable project pipelines.
Power and Energy Infrastructure
Power sector construction is leading the nonbuilding segment, driven by several concurrent trends that show no signs of slowing:
- Expansion of renewable energy generation, including large-scale solar and wind farm installations across multiple states
- Grid modernization projects to accommodate distributed energy resources and improve resilience against extreme weather events
- Natural gas plant construction and pipeline infrastructure upgrades to support baseload power generation
- Battery storage facility development to capture and dispatch intermittent renewable power during peak demand periods
These projects benefit from long-term committed funding streams through utility rate cases, federal tax incentives, and state renewable portfolio standards, making them less vulnerable to short-term economic fluctuations compared with private commercial developments that depend on tenant demand and financing availability.
Water and Environmental Projects
Water and wastewater infrastructure represents another pillar of nonbuilding growth. Aging municipal water systems, federal clean water mandates, and climate adaptation requirements are driving sustained investment across the country. Many municipalities face urgent needs to replace lead service lines, upgrade treatment plants, and expand stormwater management capacity to handle more frequent extreme precipitation events.
Spending on water infrastructure benefits from both federal grants and state-level revolving fund programs that provide predictable, multiyear funding streams. The Environmental Protection Agency’s Clean Water and Drinking Water State Revolving Funds continue to channel billions of dollars annually into construction projects, providing a stable foundation for contractors specializing in this subsector.
Environmental Remediation and Compliance
Environmental construction projects, including brownfield redevelopment, levee and flood control systems, and Superfund site remediation, continue to receive committed federal and state funding. These projects carry longer planning horizons and are less susceptible to private-market volatility, offering a stable niche for contractors with the right expertise.
Data Centers: The 35% Growth Anomaly Reshaping Construction Demand
Perhaps the most striking data point in the FMI report is the projected 35% increase in data center construction spending from 2024 levels. This explosive growth reflects the accelerating demand for cloud computing, artificial intelligence infrastructure, and digital storage capacity across virtually every sector of the economy. Data centers have transitioned from a niche specialty to one of the most dynamic segments in all of construction.
Why Data Centers Are Booming
Several structural factors are driving unprecedented demand for data center construction, creating a multiyear tailwind for firms that can serve this market:
- The rapid expansion of AI training and inference workloads requiring massive computing clusters with thousands of specialized processors
- Enterprise cloud migration continuing across industries, driving need for hyperscale facilities from major technology companies
- Edge computing deployment for IoT, 5G networks, and autonomous systems requiring distributed processing capability
- Growing data sovereignty regulations requiring local data storage in multiple jurisdictions around the world
Construction Implications of Data Center Growth
Data center construction differs significantly from traditional commercial building, presenting both opportunities and challenges for contractors moving into this space. The technical requirements are demanding, but the premium pricing and repeat-client relationships make it highly attractive for firms that can deliver consistently.
| Factor | Data Center Requirement | Construction Impact |
|---|---|---|
| Electrical infrastructure | Extreme power density (30-50 kW per rack) | Requires specialized MEP subcontractors and longer lead times for transformers and switchgear |
| Cooling systems | High-capacity liquid and air cooling | Complex mechanical systems; demand for skilled HVAC technicians exceeds supply |
| Structural loading | Heavy floor loads (150-300 psf) | Requires reinforced slab design and deeper foundations than standard commercial |
| Security and redundancy | N+1 or 2N backup systems required | Increases project complexity, cost, and commissioning timelines significantly |
| Speed to market | Accelerated schedules (12-18 months typical) | Prefabrication and modular construction methods become essential for on-time delivery |
Contractors entering the data center market should invest in specialized training, build relationships with electrical equipment suppliers, and develop expertise in fast-track project delivery methods. The sector’s growth trajectory suggests it will remain a bright spot for years to come, as discussed in How Construction Conferences Drive Professional Growth and Industry learning networks that support specialization and knowledge sharing among construction professionals.
Strategic Positioning for Construction Firms in 2026
With an overall market growing only 1%, competition for projects will intensify considerably. Construction firms must make deliberate strategic choices about which sectors to pursue, what capabilities to develop, and how to manage risk in a low-growth environment where every percentage point of margin matters.
Sector Strategies by Firm Type
The following strategies can help firms align with the 2026 market realities identified in the FMI outlook and position themselves for success regardless of which sectors they serve:
- Infrastructure-focused firms should continue pursuing federal and state-funded projects in power, water, and transportation. Backlog stability from committed funding provides a cushion against private sector volatility that other firm types cannot rely on.
- Commercial builders facing a flat private market should explore diversification into data center construction or healthcare facilities, where demographic trends and technology demand support sustained activity independent of broader economic cycles.
- Specialty contractors in MEP, concrete, and steel should develop expertise in data center requirements. The 35% growth in this segment will create sustained demand for qualified subcontractors, and early movers will have an advantage in building relationships with general contractors active in this space.
- General contractors should evaluate joint venture and integrated project delivery models for complex infrastructure and data center projects, where collaborative approaches can deliver better outcomes under challenging schedule and performance requirements.
Managing Risk in a Low-Growth Environment
With margins already tight across the industry, the 1% growth environment leaves little room for error. Firms should prioritize the following risk management practices to protect profitability and maintain financial stability:
- Strengthen preconstruction and estimating capabilities to avoid bidding errors on competitively priced work where margins are thin
- Build subcontractor relationships early for specialized scopes like data center electrical and mechanical systems that face capacity constraints
- Develop robust project management systems to control costs and schedules on fixed-price contracts where overruns directly impact profitability
- Maintain flexible staffing models that can adjust to shifting sector demand without creating overhead drag during slower periods
Technology Adoption as a Competitive Advantage
In a market where growth is hard to come by, operational efficiency becomes a decisive differentiator. Construction firms that invest in technology can capture margin advantages that compound across project portfolios, allowing them to win work at competitive prices while maintaining healthy profitability.
- Project management platforms that provide real-time cost and schedule visibility across the entire project portfolio
- Building information modeling for clash detection and prefabrication coordination that reduces field rework and material waste
- Field productivity tools that reduce administrative burden on superintendents and foremen, freeing them to focus on on-site execution
- Data analytics for bid decision support, market intelligence, and identifying which project types and clients offer the best risk-adjusted returns
Artificial intelligence tools are increasingly playing a role in construction workflows. Ai Transforming Construction Industry approaches are helping firms automate estimating, optimize schedules, monitor safety conditions through computer vision, and improve document management, creating competitive advantages that matter most in tight markets where every efficiency gain directly improves the bottom line.
Workforce Development for a Changing Market
The labor shortage remains a binding constraint across all construction sectors. In a 1% growth market, firms cannot rely on expanding their workforce to capture market share. Instead, they must focus on productivity improvements through technology adoption, off-site prefabrication, and better crew utilization that maximizes output from existing headcount. Investing in training programs that upskill current workers in data center and infrastructure specialty work will pay dividends as those sectors continue to outperform the broader market average.
The FMI Corporation’s 2026 outlook paints a picture of an industry in transition. Modest overall growth masks significant divergence between sectors, with infrastructure and data centers pulling ahead while private commercial construction lags behind. For construction firms, the message is clear: strategic positioning, operational efficiency, and targeted investment in growing sectors will determine who thrives in the year ahead. Firms that align their capabilities with the sectors FMI identifies as growth leaders will be best positioned to capture market share and build sustainable backlog even in a low-growth environment.
Article based on FMI Corporation’s 2026 North American Engineering and Construction Industry Overview as reported by For Construction Pros (March 2026).