By KERRY SMITH BUCK

Despite persistent headwinds of the military conflict with Iran, stubbornly elevated interest rates, construction labor shortages and uncertain tariffs, U.S. construction is poised to continue delivering in Q3 and Q4 2026.

And those firms that are not having to spend time recruiting for valuable field positions will win the day.

According to the AIA Consensus Forecast, the industry is projecting cautious but uneven low single-digit growth in late 2026, with overall starts rising by 1.6 percent. Megaprojects, AI-powered data centers and power infrastructure drive strong demand, while traditional commercial construction and civil projects face lingering friction.

Key market trends for Q3 & Q4 2026 include: 1) modest overall growth in commercial construction, heavily skewed by the U.S. data center boom; 2) mid-single-digit spending gains in institutional construction nationwide, with healthcare facilities leading the way; 3) declining manufacturing spending (of 3.9 percent) during the second half of this year.

Growth is severely limited by several industry-wide hurdles, according to the Associated General Contractors of America. These include: interest rates (which are discouraging new project starts) and tariffs (which are pushing baseline cost escalation up by 4 percent to 6 percent).

No doubt, nonresidential and megaprojects are leading the way.

The AGC confirms that private-sector construction – heavily buoyed by data center expansions – are projected to see explosive year-over-year growth, up to 25.2 percent. Power infrastructure is also seeing heavy investments.

And while the civil and infrastructure pipeline remains steady, it has been downgraded due to macroeconomic factors, rising costs, and shifting policy priorities.

Costs – partially attributable to tariffs – for materials including steel, aluminum and copper remain higher than normal, while volatile oil prices continue to impact transportation and delivery costs.

According to Colt Kierstead, founder of BLDR Construction Recruiting, spending on manufacturing facilities is expected to decline 2 percent this year with an additional decline of 2.6 percent in 2027, and warehouse spending is expected to continue a trend that already saw an almost 20 percent decline in 2025.

A commercial general contractor trying to plan a year ahead, says Kierstead, the question of which sectors the firm serves has never mattered more.

“The firms positioned in data centers, healthcare, education and infrastructure are as busy as they have ever been,” Kierstead said. “The firms positioned primarily in commercial office, retail and manufacturing are navigating a genuinely difficult environment with fewer competitive bids and thinner margins. The market has not gotten bad. It has gotten selective,” he added.

The scale of what is happening – specific to data center construction in the U.S. – is genuinely historic, says Kierstead.

“Cloud providers and AI platform operators are planning multiyear investments in compute, power and campus-scale facilities that represent one of the largest allocations of private capital to a single building type in recent memory,” he said. “Meta, xAI, OpenAI, Amazon Web Services, Microsoft – the names behind these projects – read like a technology industry directory. The construction programs they are funding read like nothing the industry has seen before.”

The GCs winning this work, Kierstead observes, are discovering something important about it. Data center construction is not commercial construction with a different tenant. It is a fundamentally different delivery environment – compressed timelines, specialized mechanical and electrical systems, extraordinary quality standards and cost-per-square-foot levels that dwarf conventional commercial work. “The firms that understood this early and built the people and processes to deliver it are in an extraordinary competitive position,” said Kierstead. “The firms that are chasing this work without that foundation are learning the difference the hard way.”

And while data centers dominate the conversation, healthcare construction has been quietly running at a high and sustained level, with 2026 being no exception. Healthcare sector spending is projected to increase 4.3 percent both this year and next, according to Associated Builders and Contractors.

For GCs with institutional experience, Q3 and Q4 2026 represent one of the better environments in recent memory. The work is well-funded, the clients are sophisticated and the projects tend to be complex enough that experience and relationships matter more than price.

Multiple commercial construction association economists agree that the firms investing in talent right now – filling their leadership pipelines while others are pausing – are positioning themselves for a significant competitive advantage in the back half of the year and into 2027.

Robust backlogs shift the strategic focus from demand risk to execution risk. Scheduling precision, cost controls and workforce availability are no longer just operational concerns; they are the factors that determine whether strong backlogs translate into actual profitability.

“The GCs who will win the back half of 2026 are the ones who have the people in place to execute on the work that is already committed. The ones still searching for a superintendent or a project manager when a project is ready to mobilize are the ones who will feel the year’s second half most acutely.”