One Industry, Two Trajectories

Construction spending is growing on paper. In April 2026, the Census Bureau reported total construction put in place at a seasonally adjusted annual rate of $2.172 trillion, up 0.4 percent from March and 0.9 percent year over year. Public construction was at $532.7 billion annually, with highway and street work at $149.6 billion and educational construction at $113.7 billion.

But those headline numbers increasingly obscure the most important story in construction: the market has split. According to KPMG Senior Economist Yelena Maleyev, real construction activity — adjusted for the 6.4 percent year-over-year rise in input prices — is not growing. It is falling. Costs are climbing several times faster than spending, and construction placed a drag on GDP growth to start the year and is set to remain one.

What is growing, and what is not, tells the full story.

The Winners: Data Centers, Power, and Megaprojects

Data center construction is the single most powerful structural driver in the U.S. construction market today. Data centers rose 1.9 percent in April alone and are up a remarkable 28 percent year over year, while spending on power construction climbed 6 percent over the same period as utilities expand grid capacity to meet AI infrastructure demand. Together, data centers and utilities now account for nearly all the growth occurring in nonresidential construction.

ConstructConnect Chief Economist Michael Guckes has noted that in 2025, 92 percent of all office construction starts in ConstructConnect's database were associated with data center projects — a statistic that reframes what the office construction category now means. The platform's year-to-date data through April 2026 shows nonresidential building starts up 36 percent overall, with commercial up 72 percent and data centers up 94 percent in private planning activity year over year.

The concentration of this growth among large contractors is striking. Among ABC members with $100 million or more in annual revenue, 42 percent are now under contract on data center projects — and those firms report an average backlog of 14.2 months, compared to 8.3 months for contractors without data center exposure. As ABC Chief Economist Anirban Basu has noted: momentum remains confined almost exclusively to the data center segment.

The Losers: Manufacturing, Warehouse, and Traditional Commercial

The sectors pulling construction down tell an equally sharp story. Manufacturing construction dropped 1.2 percent in April and now sits 18.5 percent below year-ago levels, extending a sustained retreat from a 2024 peak driven by CHIPS Act and IRA-funded factory construction that has largely delivered its starts. Manufacturing remains the largest nonresidential category by spending, but utility construction is closing the gap rapidly.

Warehouse and distribution projects are down nearly 20 percent year over year in ConstructConnect's pipeline data, reflecting the post-pandemic correction in industrial logistics construction. Public planning is down 20.6 percent. U.S. planning projects overall are down 4.5 percent despite the gains concentrated in technology-driven categories.

AIA Chief Economist Richard Branch has described the market as definitively K-shaped: data centers, power, healthcare, and AI-fueled megaprojects climbing steeply while traditional commercial and education construction remain flat or declining. In Branch's assessment, real construction activity — boots on the ground — has been flat at best in the non-residential building space for the past two years.

The Megaproject Effect

One structural shift is reshaping how all of this is measured. Michael Guckes notes that megaprojects — billion-dollar-plus builds — now make up more than 25 percent of all nonresidential construction spending. A decade ago, they represented roughly 10 percent of the total. This concentration means a handful of hyperscale data centers, energy transmission projects, and advanced manufacturing facilities are significantly moving national spending aggregates in ways that obscure conditions for mid-market contractors.

The private planning pipeline does show signs of future broadening. Private planning activity in ConstructConnect's verified pipeline is up 26.2 percent year over year. Multi-residential projects are up 64 percent, retail up 40 percent, and medical up 23 percent. ConstructConnect's Kristy O'Brien notes that owner sentiment is genuinely improving, with a sense that waiting is no longer viable — a tone absent a year ago. But improving sentiment has not yet uniformly translated into awarded contracts.

Public Construction: Growing, But Not in Real Terms

Public construction is one of the clearer bright spots in nominal terms. Engineering and civil construction starts are up 13 percent year to date through April 2026, with water and sewage treatment up 20 percent, bridges up 13 percent, and electric power infrastructure up 14.5 percent.

But even public construction is not growing in real terms. Public construction rose 3.7 percent from a year ago in April — below the 6.4 percent construction input price inflation for the same period, meaning the real volume of public construction work being placed is declining. Highway and street construction rose just 0.4 percent. Educational construction's 1.2 percent annual gain represents an inflation-adjusted decline.

What Contractors Should Do

The K-shaped market is not a temporary condition. The structural drivers — hyperscale AI demand for data center and power infrastructure, a manufacturing construction retreat from its CHIPS/IRA peak, and an unsettled residential market — will shape the landscape well into 2027. Several strategic priorities stand out:

• Subcategory selection matters more than overall market conditions. A contractor in healthcare, data center infrastructure, water/utility, or educational construction faces an entirely different market than one in warehouse or standard commercial TI work.
• Private pipeline visibility is critical. Private planning activity is running ahead of public. Contractors who only monitor public RFPs are missing the larger share of total spend.
• The megaproject divide is widening. Firms with data center exposure report 14-month backlogs. Those without are at 8.3 months or lower. Understanding where your firm sits — and whether diversification into technology-adjacent scopes is achievable — has become a front-burner strategic question.

The construction industry in mid-2026 is growing in aggregate but declining in real terms. What is growing is concentrated, technically demanding, and largely captured by large firms with existing relationships in data center and power markets. The next inflection — whether a broader private commercial recovery or a slower reckoning as the IIJA pipeline winds down — will determine whether the K-shape widens further or begins to close.

Sources

• ConstructConnect: What Construction Experts Are Warning About the Industry (June 4, 2026)
• KPMG US: Construction Spending Quietly Stalls (June 1, 2026)
• ABC: Contractor Backlog, Confidence Rise Again in April (May 2026)
• AGC Data DIGest via Construction Citizen (June 2, 2026)
• U.S. Census Bureau: Monthly Construction Spending, April 2026 (June 1, 2026)