End of Year 2025: The State of the Commercial Construction Market
As 2025 nears its conclusion, the commercial construction market is showing mixed performance results with cautious hopes for a robust 2026.
Throughout 2025, several factors produced a drag on the economy, and the commercial construction field was not immune. These included:
- High interest rates
- Persistent labor shortages
- Rising materials costs
- Supply chain disruptions
- Shifting tariff policies
The tariffs imposed by the Trump administration, besides contributing to uncertainty, led to higher prices for a number of imported commodities critical to the construction trade:
- Imported steel, copper, and aluminum were subject to 50 percent tariffs.
- Lumber imported from Canada was subject to a 35.2 percent tariff.
(Tariff rates are continually being renegotiated, but their general impact is to increase materials costs.)
While the overall GDP declined by 0.5 percent in the first quarter, commercial construction remained relatively stable, spurred largely by previously allocated government spending:
The Infrastructure Investment and Jobs Act, passed in 2021, provides funds for a variety of projects including highways and bridges. Spending was spread over a five-year period, and by 2025, 66,000 projects had begun with IIJA funding. Of $431,816,017 allocated, $177,487,109 had been spent by August 2025.
The CHIPS and Science Act (actual name: Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022) was enacted to boost domestic production of semiconductors, among other priorities. It provides $52 billion in direct funding and tax incentives with another $200 billion for research and development. That has resulted in more than 50 new projects across the country, including the construction of manufacturing facilities.
Source: Semiconductor Industry Association
The economy rebounded somewhat in the second quarter, to an annual growth rate of 3.8 percent. And commercial construction activity remained steady.
Commercial Construction: The Resilient Industry
Despite the headwinds, strong activity in certain areas made commercial construction one of the bright spots in the 2025 economy. Renewed activity following the covid pandemic had pushed growth to new levels in 2023 and 2024. Much of that expansion flattened in 2025, but the activity levels remain historically high.
Here are some areas that showed the strongest performance:
Data Centers
The demand for warehouses that store data rather than physical assets has exploded and shows no signs of letting up. Over the past five years, spending on construction related to data centers increased by 350 percent, reaching $40.1 billion in 2025.
Northern Virginia remains the largest data center hub in the U.S., but Southern locations are catching up quickly, particularly the Dallas and Atlanta metropolitan areas.
Private Data Center-Related Construction Spending
Source: CBIZ
Manufacturing
A slowdown in the production of computer and electronic components contributed to a 6 percent drop in the manufacturing subsector from its all-time high in 2024. But at $225.8 billion, manufacturing construction remains far higher than pre-2024 levels.
Manufacturing-Related Construction Spending
Source: CBIZ
Energy
As with other sectors, construction activity in various energy-related fields (electrical, gas, oil, etc.) saw robust growth in the years after the covid pandemic. That was followed by a slight drop in 2025, but the level remains historically high. These industries are particularly susceptible to shifts in public policy, and there have been substantial changes in the past year. The relative strength of this subsector can be partly attributed to the growth in data centers, which require enormous power resources.
Power-Related Construction Spending
Source: CBIZ
Healthcare
As millions of baby boomers reach retirement age and beyond, the demand for healthcare services has skyrocketed. This accounts for some of the growth in healthcare construction, which reached $69 billion in 2025. Most of that growth occurred in the public healthcare sector, and especially in the construction of new hospitals (as opposed to outpatient and specialty care facilities).
Healthcare-Related Construction Spending
Source: CBIZ
Where Is Commercial Construction Strongest?
The Sunbelt states lead the way in commercial construction growth, based on a number of factors:
- Population in-migration
- Land availability and cost
- Favorable tax and regulation policies
Examples:
Texas spends more than $90 billion annually on commercial construction—twice as much as any other state.
Looking Ahead: The State of Commercial Construction in 2026
According to Ducker and Carlysle’s 2025 Q3 US Construction Industry Outlook, the construction industry overall should grow by 5 to 7 percent in 2026. While the residential and office sectors remain sluggish, certain parts of the non-residential sector are continuing strong:
Data centers lead any discussion of future growth in the commercial construction field. Ducker Carlisle projects that data center construction could grow from $34.8 billion in 2025 to $51 billion in 2029.
Source: Ducker Carlisle
Factors that could mitigate that phenomenal growth include:
- Land scarcity
- Local, state, and federal regulations
- Lack of energy infrastructure
Infrastructure. Bridge, highway, and water treatment projects will continue to benefit from previously allocated government funding.
Entertainment facilities. In good times and bad, Americans love their entertainment. Construction of sports facilities, theaters, and concert venues is expected to remain healthy.
Aviation & Aerospace. Americans are traveling by air more than ever before, so new airplanes will always be needed. Beyond that, defense spending and private projects like Elon Musk’s SpaceX should keep this sector strong.
Healthcare. Few things are more essential to human life than healthcare. And as new treatments emerge, the demand for them increases as well. Those developments, along with an aging populace, will keep healthcare construction thriving.
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