By Will Parker

Commercial real-estate construction is poised for little or no growth this year. Data centers are the notable exception.

Higher interest rates, steeper material prices and a tight labor force provide significant headwinds to new construction this year. Spending to build offices, hotels, apartment buildings and warehouses is projected to fall in 2026, according to estimates from FMI Corp., a Raleigh, N.C.,-based construction consulting company.

But data centers, sought by large tech companies to run artificial-intelligence platforms, are a bright spot. Construction of these properties is less deterred by those higher costs because of still unmet demand from hyperscalers.

Amazon, Google and Oracle and other top users of data centers continue to finance billions of dollars of new AI-focused development, construction analysts and executives said.

"The cash is not an issue for these people," said Jay Bowman, partner at FMI.

Spending on construction of data centers will rise by 23% in 2026 compared with the year prior, according to FMI estimates. That would lift them to more than 6% of all nonresidential building construction, up from 2% in 2023.

The massive scale and expense of data-center projects presents a unique opportunity for construction firms compared with other property types, said Andy Halik, president of Chicago-based construction company Skender.

Data centers, he said, can cost more than $1 billion to build and employ thousands of workers on the construction site. By contrast, Skender's other large-scale commercial real-estate projects usually cost hundreds of millions of dollars and employ hundreds of workers.

Data centers cost more because of the electrical infrastructure needed to support them, such as power substations and generators, that these firms also build out.

"The infrastructure requirements in essence more than double" the size, Halik said.

Not counting data centers, total investment into both existing and new nonresidential structures has barely budged since 2020, while data-center investments have soared.

No property sector is immune to a potential contraction in the labor force this year. The tight construction timelines for many data-center projects could come under pressure if labor pools are too shallow, said Michael Guckes, chief economist at data and software firm ConstructConnect.

"Once you literally have every contractor within a state and every surrounding state who's available getting paid top dollar for this stuff, you just can't move physically any faster," Guckes said.

Many construction firms say they are starting to feel the effects of a tighter immigration policy on labor. A third of construction firms said their operations were affected by immigration enforcement actions in the past six months, according to a survey of more than 900 construction companies by the Associated General Contractors of America, an industry trade group.

Nearly a quarter said their subcontractors lost employees as a result of immigration enforcement. Large construction firms with annual revenue of $500 million or more were the most likely to report enforcement impacts.

AGC is lobbying the Trump administration for a new visa program for guest workers to alleviate worker shortages. Net migration to the U.S. in 2025 was likely negative for the first time in half a century, according to recent estimates from the Brookings Institution.

Tariffs also continue to weigh on building projects, though firms say those effects have yet to be fully felt. Forty percent of firms surveyed by AGC said they raised their bid prices in response to actual or proposed tariffs last year and only 11% of firms said they absorbed all tariff-related cost increases themselves.

Price increases from tariffs have hit especially hard for products made from aluminum, steel, copper and lumber when they cannot be sourced domestically, said Steve Stouthamer, an executive at Skanska USA Building, a construction company.

Overall, nonresidential building construction, which includes healthcare and educational facilities and a mix of both public and private buildings, is projected to total $844.4 billion this year, a 0.14% increase from 2025, FMI said.

Accounting for inflation, the figure would represent a decline in real terms.

Write to Will Parker at will.parker@wsj.com

(END) Dow Jones Newswires

January 19, 2026 05:30 ET (10:30 GMT)

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