Data centers dominate the latest economic report of the building industry.

Introduction

In May 2026, the economic report for the U.S. construction industry showed a significant divergence: data center construction became the overwhelming driver of growth, while other private projects remained sluggish. According to multiple recent data points, artificial intelligence (AI)-related construction activities boosted planning, groundbreaking, and employment indicators, but rising overall industry costs and weakness in non-data center sectors pose concerns.

Project Background

Since 2025, the explosive growth of AI technology has generated a massive demand for data centers. These facilities are large-scale, technically demanding, and typically involve billions of dollars in investment. The economic indicators for May further confirmed this trend: planning activities, groundbreakings, and contractor backlogs all recorded month-over-month increases, with data center projects contributing the bulk of the growth.

Key Developments

• Planning and Groundbreaking: Data from Dodge Construction Network shows that construction planning activities rose month-over-month in May, driven primarily by healthcare facilities and data centers. Meanwhile, groundbreaking for large projects increased significantly, with data centers and infrastructure projects serving as the core engines.
• Contractor Backlogs: According to ABC (Associated Builders and Contractors), industry backlog orders in May rose to their highest level since 2023, but confidence indices declined. Contractors with data center orders had a significantly stronger pipeline than other contractors.
• Job Market: Construction industry job openings in May reached a 10-month high. ABC Chief Economist Anirban Basu noted that this reflects "unusual demand" for key positions in data center construction.
• Cost Pressures: Data from the U.S. Census Bureau shows that the year-over-year increase in construction input prices in May was the largest since the pandemic. AGC Chief Economist Ken Simonson stated that contractors are facing a "double whammy" of rising material prices and slowing bid price growth.

Industry Impact

Data center construction has become a pillar of the U.S. construction market. This sector not only directly drives civil works, MEP (mechanical, electrical, plumbing), and precision installation but also indirectly boosts demand for upstream equipment (e.g., construction machinery, electrical equipment). Companies involved include large engineering firms such as Bechtel, Fluor, and AECOM, as well as numerous specialized subcontractors. However, contractors relying on non-residential private projects face challenges, as segments like commercial buildings and office spaces continue to contract.

Challenges and Risks

• Cost Volatility: Rapid increases in input prices are squeezing contractor margins, especially affecting small and medium-sized enterprises that lack hedging capabilities.- Cost Fluctuations: Rapid increases in input prices compress contractor profits, disproportionately affecting small and medium-sized enterprises that lack hedging capabilities.
• Labor Shortages: Data center construction requires specialized talent, such as electrical engineers and cooling system experts, and the supply-demand gap may drive up wages.
• Project Concentration Risk: Over-reliance on a single project type exposes the industry to volatility in AI investment cycles.
• Weakness in Other Sectors: Private non-residential construction spending has declined for the seventh consecutive month, indicating insufficient willingness to invest in traditional commercial and industrial projects.

Future Outlook

In the short term, the data center construction boom is expected to continue, driven by global demand for AI computing power. However, the industry must monitor interest rate trends and changes in financing costs. In the long term, infrastructure (such as roads and power grids) and healthcare facilities will remain resilient, while green buildings and digital twin technologies may become the next growth areas.

Conclusion

As a key indicator of the global engineering industry, the divergence in the U.S. construction market reflects the impact of technological progress on traditional structures. The strong momentum in data center construction underscores the core role of digital infrastructure in the modern economy, while weakness in other sectors reminds the industry to accelerate diversification. Globally, urbanization and industrial modernization will remain long-term drivers of infrastructure investment.