In Short:
As we approach a new year, the construction economy faces a familiar future: Uncertainty. However, there are always bright spots to the unknown, as well as plenty of opportunity. Experts from ConstructConnect, the American Institute of Architects (AIA), and the Associated General Contractors of America (AGC) recently came together for the latest Construction Economy Outlook, presented by ConstructConnect News, to give their insights on how things are going in the construction industry.
While the overall economy remains uncertain, there is some growth expected in the near term. Here’s a breakdown:
Mortgage rates eased slightly in the back half of 2025, but they are still a barrier for many hoping to buy a house. Kermit Baker, Chief Economist with the AIA, brought up a recent U.S. News survey that reported roughly 50% of potential buyers would re-enter the market if rates hit 6%.
Housing shortages persist, but innovative solutions are emerging:
“This pace of growth is going to continue,” Baker said. “In fact, building conversions have been a very popular strategy for creating housing opportunities as well as for utilizing underutilized buildings.”
It's no secret that labor shortages and rising material costs continue to challenge the industry.
According to Simonson, "Workers don't see an opportunity by jumping to another construction firm or by leaving construction for other industries. And all of this is consistent with a survey that AGC completed this summer about companies' workforce experience and expectations.”
Tariffs are driving up costs for key construction inputs:
“Tariffs may help some manufacturers, and certainly we've seen dramatic announcements by some CEOs and even heads of state about investments that they'll be making. But those often lack specificity as to time, place, or purpose,” Simonson reflected. “Meanwhile, other manufacturers are holding off because they want to see what their competitive position will be once they have to pay tariffs on their own inputs—not just on the manufacturing construction costs—and whether they're going to face retaliation or discrimination from foreign competitors.”
Not all areas of the construction industry struggled this year. Data centers and megaprojects, or those that cost at least $1 billion, are lead the way in 2025.
“Data centers remain resilient, even as other private sectors face challenges,” Christy O’Brien, Director of Content Acquisition at ConstructConnect, noted.
In his November 2025 Data Center Report for ConstructConnect News, ConstructConnect Chief Economist Michael Guckes reported on 39 late-stage preconstruction projects being tracked by ConstructConnect. All had planned start dates before the end of the year, with a combined worth of $25.5 billion.
“Should all these projects break ground as expected, it would lift total data center starts for the year to over $58 billion, a figure that is more than double the 2024 record high. Furthermore, it would also bring the 3-year compounded annual growth rate (CAGR) of data center starts spending to 98.7%,” Guckes wrote.
O’Brien is optimistic we’ll see those kinds of results.
“I think ‘data center’ is like the buzzword of the day, and I think it will remain a standout performer driven by the relentless demand for AI. It's really showing no signs of slowing for now,” she said.
Speaking during the Construction Economy Outlook, Guckes said, “Last year was a record high, and this year is blowing away last year's record highs. So the impact of megaprojects on construction simply cannot be underestimated or underappreciated.”
The construction industry is in a bit of a challenging spot right now. While growth remains slow in some major sectors, experts say there will be some innovative opportunities for builders in 2026.
Here are some key takeaways to keep in mind:
When asked about her outlook for next year, O’Brien said, “Looking ahead, I think the key question I'm interested in for next year is whether we'll see a stabilization in borrowing costs and greater clarity on the [U.S. international] trade policy. I think those two factors will likely determine whether we see a rebound in private sector activity or if this cautious approach continues.”
Speaking on reconstruction becoming a trend, Baker said, "The construction market is really unusually unbalanced at present. We're seeing a few strong sectors, but most of the core sectors we think about are really fairly weak. I think there are more opportunities in the reconstruction realm, particularly adaptive reuse and conversion of unutilized facilities. I think the demand is there.”
Guckes is focused on costs.
“It’s showing up in the data everywhere that firms have been sacrificing their profit margins to help keep prices stable, but that is only a temporary fix,” he said. “So, for 2026, be ruthless in cost control and make sure that you’re bidding correctly.
“I think that’s going to be the biggest challenge for next year for a lot of firms.”
Johnny Bradigan is a Senior Content Marketing Manager at ConstructConnect®, specializing in customer communications, newsletters, product launches, and thought leadership contributions. His work often focuses on ConstructConnect’s solutions for building product manufacturers and takeoff products, including On-Screen Takeoff®, PlanSwift®, and Quote Soft®. With over 15 years of experience in marketing, corporate communications, journalism, and leadership development, Johnny has a diverse background covering everything from breaking national news stories to educational blog posts.
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