2026 Commercial Construction Outlook: Labor, Competition, and Where the Work Is

The State of Construction Heading Into 2026

If you want a clear, straightforward answer on how the 2026 commercial construction outlook is trending, it will be difficult to give you one. The outlook for 2026 and beyond is a mixed bag. 

While spending in the industry overall is declining, other sectors, like data center construction, are growing considerably. While construction costs are rising, spending has shown a variety of stories on what segments are seeing the most investment. It is difficult to say that the industry is moving in a single direction, but there are still extensive growth opportunities for organizations that know where to look.  

As proud partners of the Associated General Contractors of America (AGC), PlanHub was honored to connect with Chief Economist Ken Simonson of the AGC in a recent webinar. He offers some great insight into what the industry looks like this year and discusses the main trends to consider, including rising prices, a steady demand for skilled labor, and the rise of non-residential construction work highlighted by data centers.

Learn more about some of the biggest factors construction organizations should consider for this year and beyond, including some of the most notable segment trends, workforce considerations, and where to look in order to keep a steady flow of work. Use this guide as an introduction before accessing the resource. 

Construction Employment Distinct Between Two Industries

Much like the rest of the industry, construction employment in 2026 does not show one overall trend. Instead, employment has shown two different trends between residential and non-residential construction. 

As of August 2026, nonresidential construction employment has actually been growing steadily, at about a 2.8% increase over the past year. According to Simonson, this growth can be attributed to contractors, specialty trade contractors, and civil engineering firms. However, residential employment is falling steadily, down just 0.6% since the same time in 2025, but following a trend that has taken place over the past several years.

There is a high level of variability in job growth across states, as the growth is uneven, with 36 states seeing growth, 13 states seeing a decline, and just one staying constant. Major metropolitan areas are even more variable, with 173 metro areas seeing growth and 127 facing a steady decline, with about 60 unchanged. 

Hires have stayed relatively steady at 4.4% of overall employment, but it is still one of the lowest rates. After a steady decline over the past few years, job openings have increased to almost 4% in the past year. Overall, layoffs remain low at 1.9% of overall employment as of July 2026.  Still, all of these figures have stayed relatively constant, compared to historical trends where layoffs were abundant.

The positive story behind these numbers is that retention overall remains high, which is critical in an industry that faces challenges finding workers. However, these numbers speak to the growth of non-residential construction as a whole. Segment spending highlights this story a bit more.

The 2026 Spending Picture: Declining Overall, Uneven Underneath

Total construction spending, measured by figures like the Census Bureau’s “Value Put in Place” survey, has been declining for more than 12 months, down almost 4% overall. Feeding into that figure is the mix between residential and nonresidential.

Simonson notes that residential construction is facing the steepest decline, down around 7% since July of 2025. This includes drops across the board, including private single-family homes, multi-family, and improvements. Public residential is also down 5%. 

Meanwhile, non-residential has been relatively stable, showing a 1% decline in spending, with private non-residential falling 3% but public spending picking it up by a 2% growth. When you break it down even further, there are significantly mixed results that vary by segment.

One important note from Simonson is that the figures used to measure this growth are not adjusted for inflation. With construction as an industry that faces sharper inflation than the broader economy, the construction spending forecast impacts may be even more substantial, with even positive dollar figures meaning less real work. 

Where the Work Is: The Sectors That Are Moving

The non-residential construction forecast is the most promising area of the industry, but even the sectors under this umbrella show incredibly mixed results. Some sectors are facing steady growth while others are declining sharply. Below shows the most recent spending trends for some of the common sectors. 

Power as the Biggest Mover

The power segment overall is one of the most positively affected sectors, showing the most spending growth at 5% overall. Power is driven by spending in categories like electric power, which is growing 6%, and oil/gas fields and pipelines are declining by 1%.

Simonson mentions some of the other elements that influence this sector, like solar, wind,  experimental geothermal, natural gas-fired power plants, battery storage banks, and potentially the nuclear sector.  Growth in this sector is important for general contractors, subcontractors, and suppliers with experience in the electrical, mechanical, and energy storage sectors.

Manufacturing and Cooling After the Boom

Manufacturing, which saw considerable growth and spending over the past several years, particularly related to semiconductor fabrication plants, has dropped off significantly since, according to Simonson. A previous boom in electric vehicles and battery plants has also reversed course. 

The industry overall has seen a 21% decline in spending over the past year, averaged out with the following categories:

• Computer and electronic manufacturing has declined a significant 47%
• Chemical manufacturing has grown 2% 
• Food, beverage, and tobacco manufacturing has grown about 6%
• Transportation equipment has grown 19% 

However, Simonson believes that we will see a revival in a large portion of this sector, related mostly to a return to semiconductor fabrication plants, pharmaceutical plants, and natural gas liquefaction trades.

Highway, Street, and Infrastructure

The highway, street, and infrastructure segment has shown modest growth at 4%. This figure is influenced by both a 6% growth in pavement and a slight 0.4% increase in bridge construction.

However, Simonson cautions that there is a level of uncertainty surrounding future federal funding, which may affect consistency of the sector into the next year. However, in the near term the sector still offers opportunity with consistent public works projects.

Offices, and the Data-Center Mirage

The offices segment, which includes data centers, has shown spending rises of about 17% overall. However, Simonson notes that the data center sector is the quickest growing out of all segments at a staggering 57%, which skews the numbers. He cautions that this should not be an endorsement of the office category demand overall.

The data center boom raises the average of the sector considerably, even counteracting a sharp 11% decline in private offices. In short, construction professionals should not consider this a sign of extensive growth to come for the entire sector.

The Steadier Segments

While the above segments stand out for significant changes or notable trends, several others have remained relatively steady, within about 5% declines or growth. Some of these results include:

• Education has seen a very slight decline of 0.6%, held steady by a 4% growth in pre-primary, libraries, and museums to counteract a 3% decline in higher education spending, which Simonson anticipates will decline even further in the future due to lower enrollment.
• Healthcare has faced a 2% decline overall, kept afloat by a 2% increase in construction spending, which Simonson attributes to a rise in standalone facilities that benefit an aging population.
• Transportation has seen a slight 2% spending growth, driven by increases in airport infrastructure and transit, overcoming a decline in private rail/truck. 
• Commercial construction has shown a 5% decline in spending, with warehouse and retail both down. 

Again, the theme of 2026 has been variability. Rather than being able to anticipate consistent growth or declines across the industry, professionals across trades have to remain aware of what segments are driving work and where their specialties overlap.

The Cost Squeeze: Materials, Tariffs, and Wages

Overall, the construction industry is facing significant cost increases, due to a combination of factors including international events and policy, according to Simonson.

International events like conflicts have led to an increase in fuel prices. Construction tasks like transporting materials and powering machinery that mixes cement materials all rely heavily on fuel. Diesel prices, currently sitting around $6 a gallon and having risen by 78% over the last 12 months, are a testament to the challenges that organizations are facing to rein in costs.

Simonson also notes that construction tariffs in 2026 are increasing costs on manufacturers and construction over the past year, reaching as high as 50% for instances like steel, aluminum, and copper. These tariffs have increased steel costs, as an example, by as much as 23% in the past year. He also mentions other crucial construction material prices, such as Canadian lumber and cement, as potentially impacted.

Wages are another key factor. Construction pay increases continue to outpace the private sector. Average pay increases for production and non-supervisory employees in construction were 5% over the past year, which compares to 3.3% for the broader economy. While these pay increases are a positive for employee retention, they add to the costs placed onto general contractors.

Labor and the Workforce Crunch

The workforce constraint is not unfamiliar to construction organizations, and it has been a consistent theme for many years in the industry. For a variety of reasons, maintaining a reliable workforce has added strain to organizations seeking to add or retain employees.

Simonson notes reduced migration as a key factor that has added additional strain in an industry that relies significantly on foreign-born workers, with some trades having as much as 57% foreign-born employees. 

This is in addition to ongoing challenges for construction businesses struggling to find workers with hundreds of open positions in the industry. The difficulty finding reliable employees makes it difficult to replace workers who retire or leave. With the volatility that already exists elsewhere in the industry, employee retention and relationship building must remain a key consideration for construction organizations. 

Strong pay is important for being able to add and retain workers who can offer support on non-residential projects. However, it adds greater challenges to businesses facing price hikes elsewhere.

The Demand-Side Risks to Watch

The construction industry is particularly sensitive to international events and economic impacts. With the sensitivity of the industry, Simonson believes that construction demand will continue to face challenges.

Some of the biggest factors that Simonson personally believes will impact the industry include: 

• Global uncertainty and international conflict may continue to affect material costs for organizations
• Tariffs will likely keep costs increasing not just for contractors, but also for manufacturers, retailers, and businesses that commission projects 
• Rising project costs will have to be absorbed by construction organizations, general contractors, or potentially owners
• Question marks in federal funding may impact demand for projects like schools, hospitals, and airports.

What This Means for GCs, Subcontractors, and Suppliers in 2026

To try and put it simply, the construction industry in 2026 is a mixed bag. General contractors, subcontractors, and suppliers must remain on their toes and be prepared to adapt. The most significant considerations for general contractors, subcontractors, and suppliers across the board include rising material costs and runaway spending in select segments that require strategic responses.

General Contractors

Following the key themes of 2026, general contractors should do the following:

• Target growing nonresidential niches, like power, healthcare, airports, and select public works for the most opportunity.
• Protect margins with escalation clauses and contingencies
• Build relationships with reliable subcontractors and suppliers to control volatility and limit future unknowns
• Plan labor and trade partners early given the tight workforce and the challenges of the construction labor shortage

Subcontractors

Subcontractors can be responsive to key trends with these steps:

• Stay on top of accurate cost data when submitting bids to alleviate pricing volatility for general contractors.
• Be selective about which projects you decide to submit bids on to seek the most high-value opportunities.
• Be conscious of providing value to general contractors, as value engineering becomes even more important for adapting to high costs.
• Search for opportunities that fall within the line between your wheelhouse and booming industries like the nonresidential niche and prioritize relationships with general contractors in these sectors.

Suppliers

Suppliers can adapt to the industry where it is now with the following steps:

• Follow demand toward key growth sectors, like the power, civil, and nonresidential fields, away from residential.
• Communicate pricing clearly to subcontractors and suppliers to minimize uncertainty.
• Be transparent about your key differentiators, such as lead time and availability of products.
• Provide additional value to organizations facing high costs with productivity-boosting products.

Takeaways for General Contractors, Subcontractors, and Suppliers

For all roles, the key is to remain reactive and prepared to ride out the challenges. Maintaining a strong professional network with reliable partners is helpful for all organizations, as well as having a regimented preconstruction process and using the right tools. 

PlanHub can help professionals overcome some of the volatility by providing general contractors, subcontractors, and suppliers with a convenient and surefire way to connect with opportunities in their wheelhouse in its network of 500,000+ construction professionals. 

The network features over 58,000 general contractors so subcontractors can find some of the best actively bidding opportunities right in front of you. General contractors can connect with subcontractors who can support them on their projects, and suppliers make it easy to stay on top of the best opportunities and find the best local pricing options. 

Additionally, bidding software can help identify which opportunities are the most worth pursuing in an industry where value increasingly matters and your use of time counts. Altogether, these connections and processes help professionals weather the challenges of a complex industry. 

Position Now for a Selective Year

There is a whirlwind of considerations to make for 2026, but the organizations that can remain aware of the industry direction and adapt to the trends are the ones that succeed. In a current landscape that is highlighted by variability, the main keys are to retain a strong workforce, remain reactive to price volatility, and align your work with the most promising opportunities in growing non-residential segments.

There is plenty of opportunity still in the industry this year; you just need to know where to look and how to adapt. Having access to a strong network of construction professionals, like that provided by PlanHub, and knowing where to look for work can help you stay afloat. Dive deeper into Ken Simonson’s insights shared here with all the supporting detail to keep in mind.

Watch the full webinar from AGC Chief Economist Ken Simonson and see his full 2026 construction outlook.