The nonresidential construction market continued to face headwinds during the first five months of 2026 as spending fell 7 percent in nominal dollars compared to the same period a year earlier.
Reflecting this softer market performance, the AIA Consensus Construction Forecast Panel lowered its 2026 projection from a 1.0 percent increase in spending, forecast in January, to a 0.3 percent decline. Despite near-term challenges, panelists expressed greater confidence in a rebound next year, increasing their 2027 spending forecast from 2.2 percent to 3.0 percent. Manufacturing construction experienced the most significant downward revision in the current forecast. Spending in the sector is now projected to decline 11.6 percent in 2026, following a 6.7 percent decrease in 2025, with an additional 0.6 percent decline expected in 2027.
Despite these reductions, manufacturing activity is anticipated to remain elevated by historical standards. The projected slowdown reflects a normalization of spending following the surge in investment spurred by the CHIPS and Science Act and the Inflation Reduction Act. Adding to that moderation is ongoing uncertainty surrounding tariffs and trade policy, which can significantly influence decisions to move forward with large-scale, multiyear capital projects.
The institutional sector, driven largely by public construction activity, remains largely unchanged from the January forecast, with spending projected to increase 2.8 percent in 2026 and 2.7 percent in 2027 following 1.9 percent growth in 2025. Healthcare and amusement and recreation projects continue to offer the strongest growth prospects. In contrast, the commercial sector outlook has improved since January, with spending now expected to increase 4.8 percent in 2026 and 5.8 percent in 2027. However, that strength is being driven almost entirely by surging data center construction. Excluding data centers, commercial spending would be projected to decline 1 percent in 2026 and grow only 1 percent in 2027, underscoring the widening divide within the nonresidential building market.
“The unevenness we’re seeing in construction activity reflects very different market forces at work,” said AIA Chief Economist, Richard Branch. “Projects tied to public funding, healthcare needs, and AI-related investment are moving ahead, while sectors that depend more heavily on private financing and discretionary spending continue to face significant headwinds.”
Complete details on the latest Consensus Construction Forecast.
| Forecast | ||
| Percent Change | ||
| 2026 | 2027 | |
| Nonresidential Total | -0.3 | 3.0 |
| Commercial Total | 4.8 | 5.8 |
| Office | 9.6 | 9.2 |
| Data Centers | 33.0 | 24.7 |
| Retail & Other Commercial | 0.7 | 2.7 |
| Hotel | 4.6 | 5.2 |
| Warehouse | -1.7 | 1.4 |
| Manufacturing | -11.6 | -0.6 |
| Institutional Total | 2.8 | 2.7 |
| Health | 2.6 | 4.4 |
| Education | 1.2 | 0.9 |
| Amusement & Recreation | 7.1 | 3.0 |
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