What industry trends to expect in the construction industry in 2026 | ConEquip Parts

Project Planning Ends 2025 on a Positive Note into 2026

The Dodge Momentum Index has long been considered the litmus test for construction industry growth by tracking the rate of construction planning, excluding residential planning. The last months of 2025 the DMI showed an increase of 7% over the previous period, ending the year with an overall increase of 37% over 2024. What this indicates is that the lull we saw in November was a temporary downturn, possibly due to seasonality or a dip in the overall economy. However, the planning going forward is on an uptick due to a few key industries.

Data Centers Will Continue to Prop Up the Industry

Going into the new year, data center projects will continue to make up a large part of construction planning and execution. Two major data centers broke ground in December—a $15B Stargate data center in Wisconsin and a $3B campus in Virginia—and these projects are set to continue construction for multiple years before they start running data at full capacity. Numerous additional projects are either in the planning stages or are set to break ground during 2026. These projects are a huge opportunity for builders for contractors with experience in these types of facilities, and the low level of vacancy means that it’s very unlikely that these facilities will sit empty after construction ends.

However, this growth may be tempered by external factors, primarily power and water resources. Currently data center usage sits at a level three-fold what it was in 2020, and with that rapid expansion comes the need for increased use of natural resources. Which in turn come with consequences for the communities where the data centers are being built. As the number of proposed data centers increases, so has the push back from local communities. Public comments against data center builds have increased in recent years, in part due to the situations in other communities where data centers are already built. Data centers pull an enormous amount of power from the local grid, and in some cases that grid is not sufficient for both the data center and the local community to have adequate power.

Other limiting factors come down to materials such as access to fiber optics, land restrictions, and—as discussed above—community pushback. Regardless of these potential roadblocks, the push for data centers will have a net positive impact on the industry as a whole.

Infrastructure Projects Promise a Steady Pipeline Through the First Part of the Year

Coming in after data centers in terms of planning is infrastructure and institutional construction. Many of these projects have already had funding allocated, and that committed capital will boost the infrastructure sector into 2026. However, the funding is not infinite. Projects later in the year may stall due to budget concerns and legislative issues. If governmental fund approval slows or stops all together due to political conflict, projects later in the year can experience delays.

Material Costs will Increase Marginally, but Labor Will Remain the Highest Project Cost

Material costs are not projected to skyrocket throughout the year, and are set to increase with potential interest increases, a modest 2-4% increase. Cement and concrete are projected to be steady, while steel and aluminum are set to rise or experience price turbulence due to tariff policy and supply chain issues.

The major strain on budgets is going to be in labor. While construction union membership has fallen in recent years, wages are still seeing increases. Shortages in skilled workers have plagued the industry for some time, but with the increased retirement of experienced electricians, plumbers, and framers that knowledge gap is growing. That in combination with wage growth is putting stress on project budgets.

What this all means going into 2026 is that you can—providing estimates hold true—budget less for raw materials, but you should not underestimate labor costs on a project.

Interest Rates are Predicted to Drop

Experts are predicting a drop in interest rates in 2026, which has the potential to increase residential construction due to a better borrowing environment. Fannie Mae is predicting a 5.9% interest rate by the end of the year, with other firms predicting from 6.23% to 6.4%. While this is a drop from 2025, it is not the lowest we’ve seen in recent years, that being the 2.96% interest rate of 2021. 2026’s prediction is still lower than the historical average of 7.7%. While the Fed does not itself set residential mortgage interests rates, its decisions do ripple down the economy, and that can affect residential interest rates. The Fed has noted that they may increase the federal interest rate in 2027, which may prompt some lenders to follow suit ahead of the end of 2026.