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Q2 2026
Construction Market Update
This quarterly spotlight provides an in-depth analysis of current trends, capital spend and industry outlook.
Materials inflation is squeezing construction prices.
Larger projects and compressed timelines are driving integrated delivery models.
Construction’s competitive advantage comes from connected data that predicts what’s next.
Matt Ralston
General Manager
Construction
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Market Insights
Construction Outlook
Construction Costs
Design-Build
Life Cycle Data
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From Silos to Smart Jobsites: Why Connected Data Is Our Future
If there was ever a time for us to focus on the most efficient way to deliver construction projects, this is it.
Tight labor availability, renewed continued price volatility and global uncertainty escalated by the Iran conflict have project owners turning to integrated delivery methods like design-build/EPC to reduce their risk profile.
Recent data shows that design-build/EPC is increasingly taking up a larger share of construction project delivery. It is expected to represent nearly 50% of U.S. construction spending by 2028, totaling $2.6 trillion.
But this increasing share in project delivery won’t amount to much if we don’t coordinate our data strategy at the same time throughout the project life cycle. This strategy is critical to creating the jobsite of the future for our clients, our craft and our industry.
Construction data has traditionally lived in silos: estimates in one system, field information in another and lessons learned disconnected from future projects. As integrated delivery models like design-build/EPC continue to evolve, they are helping break down and, eventually, eliminate data silos across the project life cycle.
The opportunity ahead for construction lies in not simply collecting more data but also creating smarter, more connected projects that are executed well and better inform future projects.
Check out the Construction Market Update to learn how we should approach this smarter, more connected approach to construction.
Live Safer,
Matt
Construction by the Numbers
6.6%
Increase in construction input prices from April 2025 to April 2026
8.1%
Increase in total construction starts from April 2025 to April 2026
23%
Nonresidential construction starts from megaprojects (valued greater than $1 billion) over the last year
Market Insights
Construction has remained highly driven by public infrastructure, manufacturing, utilities and data center work. These sectors are helping sustain backlogs and headline growth, but uneven demand has created a challenging environment for contractors outside the trending sectors.
At the same time, costs for critical construction materials — including steel, aluminum, copper, fuel and electrical components — continue to rise. Recent geopolitical disruption, tariff changes and tight domestic supply have added uncertainty to procurement strategies and project budgets. As a result, owners and contractors are placing greater emphasis on early planning, flexible contracting and delivery models that help manage cost, schedule and procurement risk.
In this environment, design-build and progressive design-build are gaining momentum. These approaches allow teams to engage earlier, respond more quickly to changing market conditions, and better align scope, budget and schedule before construction begins.
Key Construction Prices
(Indexed, January 2019=100)
Source: U.S. Bureau of Labor Statistics, Producer Price Indexes
Construction Outlook
The construction market entered the second quarter with steady momentum, supported by active project pipelines and strong backlogs in several high-growth sectors. While Census data reported that overall nonresidential construction spending dipped 0.2% in March, it remained slightly above year-ago levels, underscoring a market that is still moving forward despite persistent cost pressure.
Nonresidential construction starts tell a more encouraging story. Dodge Data shows that starts rose 9% in April and 8.1% over the previous 12 months, led by commercial and industrial activity. Another forward-looking signal worth watching is the Dodge Momentum Index, which tracks early-stage planning activity and jumped in April after three months of contraction.
The construction industry has become concentrated by project size as well as by sector. Nearly $1 of every $4 of nonresidential construction starts tracked by Construct Connect was from megaprojects, or projects valued greater than $1 billion. That concentration is also showing up in contractor backlogs. Associated Builders and Contractors’ Construction Backlog Indicator rose to 8.8 months in April, up roughly 10% since January. But the gains are not evenly distributed. Contractors with more than $100 million in annual revenue reported backlogs 2.2 months higher than a year ago, while smaller contractors saw total backlog decline. Contractors with data center work also reported backlogs nearly 50% greater than firms without data center contracts. Scale and sector positioning are increasingly determining who benefits from a growing market — and who gets left behind.
FMI’s Nonresidential Construction Index — measuring contractor sentiment — also remains in expansion territory, though it softened slightly in the second quarter to 53.4 from 54.5 after a strong jump at the start of the year. The two biggest drags on sentiment are familiar: labor and material costs. Neither shows signs of easing, a theme explored in depth in the cost outlook below.
Construction Costs
In the first four months of 2026, construction input prices (tracked by the BLS Producer Price Index) rose more than they did over the entire previous three years combined, up 7.4% year-over-year. The price hikes were particularly drastic in March and April, with each posting 1.7% monthly increases, the highest single-month gains since 2023.
The Iran Conflict and Subsequent Energy Shock
While inflation was already rising above the Fed's target, much of the recent pressure came from the Iran conflict's damage to critical fuel infrastructure and disruptions to the Strait of Hormuz, a transit route for nearly 20% of the world's oil (EIA). Crude petroleum, gas and diesel prices are all up dramatically since the start of the conflict, bleeding into transportation and delivery costs across virtually every material category. Despite a ceasefire, the Strait has remained effectively closed, and the EIA does not expect activity to resume until June. The agency's latest Short-Term Energy Outlook projects a longer path to price normalization than previously expected, and forecasts increased U.S. natural gas production, LNG exports, electricity consumption and utility-scale solar capacity as a result. Even when the Strait reopens, the underlying disruption to fossil fuel infrastructure will continue to weigh on global supply for years to come.
Metals Momentum
Metals have added significant pressure on construction costs and the numbers reflect just how broad that pressure has become. Producer price data shows the overall metals and metal products index rose 22% from January 2025 to April 2026. Steel mill products are up roughly 32%, aluminum mill shapes have climbed 48%, and copper and brass mill shapes have risen nearly 19%.
Each commodity tells its own story. Copper demand is being driven by the data center boom and nationwide grid upgrades, straining a global supply chain already facing long-term deficits. Aluminum is feeling the direct downstream effects of the energy shock; smelting requires immense amounts of electricity, so volatile fuel prices translate quickly into higher production costs. Steel, however, has become the most immediate availability concern. Data centers, advanced manufacturing, grid infrastructure and other megaprojects are absorbing mill capacity. Wide-flange beams, particularly W24 and larger, are becoming harder to source. Beam lead times are now roughly 12-plus weeks for West Coast delivery and beam mill prices are at all-time highs. For certain W24-and-larger sections, production is being pushed into late-summer or September rolling windows (Nucor-Yamato). For projects with heavy steel packages, the risk is no longer just price escalation; it is whether the right sections can be secured in time to protect the schedule.
Tariffs: Still the Wild Card
Tariff policy remains one of the most important and dynamic variables for metal costs. The White House recently revised Section 232 tariff rules, placing a 50% tariff on the full value of articles made entirely or almost entirely of steel, aluminum or copper. Derivative articles substantially made of those metals are subject to a 25% tariff, and certain metal-intensive industrial and electrical grid equipment are subject to a 15% tariff through 2027. On the other hand, products with 15% or less steel, aluminum or copper content are no longer subject to Section 232 metals tariffs.
Steel imports went into freefall following tariff increases last year and domestic supply cannot keep up with demand. Due to the tight supply and longer lead times, steel imports have ticked up in recent months as buyers opt to pay import duties to avoid longer lead times; a trade-off that quietly erodes margins and makes procurement planning significantly more complex.
Following the Fed
The broader economic ripple effect is also keeping developers on edge. While the Fed held interest rates steady at its late-March meeting, opting to look past what it hopes is a temporary energy shock, prolonged fuel inflation could force policymakers to reconsider rate cuts later this year. Higher-for-longer interest rates would add another layer of friction for owners financing new capital projects, making the case for early-stage cost certainty and flexible delivery models even stronger.
U.S. Imports of Metal Materials and Products
(in billions of dollars)
Source: U.S. Census
Design-Build
To navigate this volatile landscape, owners and contractors are rethinking how projects are delivered. With schedules compressing and post-bid material costs climbing, the industry is pivoting toward collaborative delivery models like design-build to manage uncertainty.
The latest Dodge Construction Network's SmartMarket Brief features a survey that highlights the strain, with more than 80% of contractors reporting tight schedules and material cost hikes after bidding. The majority also report escalating project complexity (72%) and material shortages (67%) compounding these challenges. The traditional delivery model is struggling to absorb today’s market conditions. In response, contractors are pushing for contract terms that offer better price flexibility and allow for earlier subcontractor engagement during preconstruction.
Progressive design-build is also gaining traction as a strategy to manage escalation, long-lead procurement and overall project risk. An ACEC Research Institute study published in April 2026 found strong and consistent growth and satisfaction with the model. Among experienced firms, 88% reported an increase in progressive design-build project counts, 81% saw growth in project value and 79% expressed overall satisfaction with using progressive design-build.
This shift appears structural rather than temporary. A study from DBIA and FMI forecasts the delivery method will capture 47% of U.S. construction spending between 2024 and 2028, up from 44% over the previous five years. For owners and contractors alike, getting ahead of that shift is no longer optional.
The Next Frontier: Life Cycle Data
Before smartphones and real-time navigation, getting to a jobsite often meant printing directions from MapQuest (or writing them down) and hoping nothing had changed along the way. The route was fixed. If traffic built up, a road closed or conditions shifted, there would be little time or ability to adjust, only react.
With modern navigation, platforms like Google or Apple Maps reassess conditions using real-time input and historical patterns. Rather than responding after the fact, they anticipate potential issues, reroute before disruption occurs and guide users along the most efficient path.
That push for efficiency, driven by real-time inputs, is steering construction in the same direction.
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