Economic Forecasts
Industry Outlooks Diverge on Timing, Agree on Growth Drivers
Business consultant Ducker Carlisle’s Q3 2025 U.S. Construction Industry Outlook projects the market is at the trough of the spending cycle, with growth resuming in 2026.
The U.S. construction industry is nearing the low point of its current spending cycle, with a rebound expected in 2026 as nonresidential and infrastructure sectors take the lead, according to a series of new forecasts.
Ducker Carlisle, a Troy, Mich.-based consulting firm in construction markets, pricing and M&A advisory to manufacturers, distributors and contractors, released its third-quarter 2025 Construction Industry Outlook on Sept. 17—projecting total put-in-place construction will rise 5.3% next year and expand at an average annual rate of 5.7% through 2029.
While residential markets remain under pressure, the firm notes that affordability, Federal Reserve interest rate policy and cleared backlogs both raise financing challenges and ease pressure on labor and materials, creating mixed conditions that shape commercial, institutional and infrastructure work.
Ducker estimates data center construction will exceed $50 billion by 2029, driven by hyperscalers expanding cloud storage, streaming and AI workloads. Bank of America data show spending already at a $40-billion annualized rate in June, up nearly 30% from a year earlier.
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Regional Realignment
Southern states are projected to capture nearly 45% of U.S. construction spending by 2029, with combined activity approaching $1 trillion, according to Ducker Carlisle.
Ducker projects Southern states will account for nearly 45% of U.S. construction spending by 2029, close to $1 trillion in combined value. Growth is concentrated in the South Atlantic and South-Central regions, driven by population migration, disaster recovery programs and expansions in manufacturing and technology. States including Texas, Georgia, the Carolinas, Arizona, Utah and Colorado are key growth markets.
Analysts largely agree the South will dominate U.S. construction growth in the latter half of the decade. FMI’s midyear forecast pointed to similar migration-driven activity in the South and Mountain West, while McKinsey highlighted the concentration of large-scale manufacturing megaprojects in the same areas.
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Cost Pressures and Productivity Shifts
Input costs remain elevated, between 1% and 3% below mid-2022 highs and unlikely to return to pre-pandemic levels. Tariffs and inflation are expected to sustain pressure on structural, architectural and engineered metal products.
US Census Bureau data show total construction spending at a $2.139-trillion annual rate in July, down 2.8% year-over-year, with nonresidential work slightly lower than in June—evidence of the trough before growth resumes.
Technology adoption is emerging as a critical offset. Contractors are deploying AI to automate bidding, quoting, procurement and pricing, with case studies pointing to meaningful savings and revenue gains.
Off-site and panelized construction methods continue to expand as firms seek productivity improvements.
PwC’s “Future of Industrials” survey of more than 500 executives, released Sept. 17, reinforces these themes. About 93% of respondents said reshoring, modular manufacturing and energy resilience are essential to U.S. competitiveness by 2030, and nearly half expect operations to shift toward modularized or off-site production. The survey also highlights workforce shortages and grid resilience as critical constraints.
McKinsey has stressed the broader productivity gap in U.S. construction and the need for digitization and modular delivery, while PwC’s findings suggest industry leaders now view those strategies as essential, not optional.
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Risks and Constraints
Forecasters broadly agree that nonresidential and infrastructure markets will strengthen, but risks remain. The U.S. Energy Dept. and utilities warn that grid constraints, zoning and environmental rules could slow data center growth despite record investment.
McKinsey highlights slow permitting and licensing as major barriers, with some projects taking decades to clear nonconstruction approvals. Trade policy uncertainty clouds manufacturing, while PwC adds labor shortages and regulatory friction in scaling modular production and energy transition projects.
While residential weakness continues to weigh on the market, forecasts and government data suggest sector-specific growth, regional shifts and technology adoption will position contractors and suppliers for expansion in the latter half of the decade.
Bryan Gottlieb is the online editor at Engineering News-Record (ENR).
Gottlieb is a five-time Society of Professional Journalists Excellence in Journalism award winner with more than a decade of experience covering business, construction and community issues, including finance, law and real estate. He has reported for Adweek and the San Diego Daily Transcript and led a community newsroom in Santa Monica, Calif. He served as editor-in-chief of the Detroit Metro Times and as managing editor at Roofing Contractor, where he helped shape national industry coverage. At Engineering News-Record, Gottlieb covers breaking news, large-scale infrastructure and megaprojects, regulatory developments and business trends across the U.S. and global construction sectors.
email: gottliebb@enr.com | office: (248) 786-1591
