The U.S. commercial construction market remains a study in contrasts. Elevated material costs, workforce shortages, and tariffs continue to weigh on projects, yet demand in multifamily housing, commercial development, and technology-driven facilities like data centers has kept activity strong.
Here’s how the sector has fared over the past year and a half — and what lies ahead for the remainder of 2025 and into 2026.
Material Costs: Still a Top Concern
High input costs remain one of the largest obstacles for contractors and developers. JLL reported that construction material prices rose between 7%–12% in 2025, reversing earlier signs of easing (For Construction Pros).
By mid-2025, the Producer Price Index showed inputs up 2.8% year-over-year, with building materials rising 3.3%. Machinery parts (+31%) and metal trim (+25%) posted some of the sharpest increases (NAHB Eye on Housing).
Tariffs have made matters worse, adding an estimated $7,500–$10,000 to the cost of a new home and significantly raising costs for commercial construction projects as well (AP News).
Workforce Challenges
Labor shortages remain a critical constraint. The Associated Builders and Contractors estimate the industry needs to attract 439,000 new workers in 2025, with demand climbing to nearly 499,000 in 2026 (ABC).
Immigration-related constraints have compounded the issue. The U.S. is experiencing just 1% annual immigration growth compared with the historic 3%, reducing the available skilled workforce (For Construction Pros).
For large industrial and infrastructure projects, this gap is particularly acute. Bechtel projects the Gulf Coast will need 80,000 additional skilled craft professionals by 2026—nearly double today’s workforce in the region (Wall Street Journal).
Market Activity: Commercial Growth with Headwinds
The housing market set the tone for 2025, with housing starts rising 12.9% year-over-year in July and multifamily construction leading at +27% (Wall Street Journal). But with building permits down 5.7%, questions remain about sustainability into 2026.
For the commercial sector, growth is steady but modest. The AIA Consensus Forecast projects +1.7% spending growth in 2025, improving slightly to +2.0% in 2026. Commercial buildings are expected to see stronger performance, climbing from +1.5% growth this year to nearly +4% next year (HPAC Engineering).
Data Centers and Infrastructure: Driving Demand
The strongest momentum is coming from technology and infrastructure-related projects. Data centers are the fastest-growing commercial subsector, projected to expand 21.9% in 2025 and another 14.6% in 2026 (Architect Magazine). Semiconductor fabrication and infrastructure work are also keeping contractors busy, helping offset slower growth in other commercial categories (LightNow Blog).
Public infrastructure spending has also provided stability. Funding tied to the Infrastructure Investment and Jobs Act continues to roll out, with significant allocations for roads, bridges, and utilities bolstering construction pipelines.
Industrial Softening
While commercial and infrastructure work are gaining, the industrial sector shows signs of slowing. Forecasts call for a ~2.5% contraction in 2026, driven by reduced investment in certain heavy manufacturing facilities (Architect Magazine).
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