Hope for the best

Anyone who spent time in Scouts probably heard the saying “Be prepared.” Perhaps that’s one reason why I tend to be more pessimistic than most, but that doesn’t mean I don’t hope for the best.

That said, talking to Zack Fritz, an economist with Associated Builders and Contractors (ABC) and attending a subsequent webinar hosted by ABC Chief Economist Anirban Basu didn’t do much to alleviate the eternal pessimist in me when it comes to 2026, which is likely to be marred by uncertainty on many fronts but particularly in the construction industry.

Fritz, who provided a forecast on the 2026 construction economy in our construction outlook feature, didn’t pull any punches when I asked him point-blank what to expect: There are plenty of indications that it will be a tough year.

The underlying issue that plagued the construction industry in 2025 is borrowing costs. High interest rates might be nice for rainy day savings accounts, but they’re not ideal when it comes to green-lighting construction projects. And if the industry is going to see more activity in 2026, those rates will need to decrease more than they have recently.

The silver lining from 2025 was the continued boom in data center construction driven by the artificial intelligence obsession sweeping through virtually every large technology company in the world. But Fritz added that just about every other sector struggled to varying degrees.

The Trump administration’s trade policy also has strained the industry. Basu added during his webinar that tariffs on key inputs to construction, including steel, aluminum and copper, have contributed to increased pricing for materials. And those popular data centers use a ton of copper.

Basu acknowledged that the Trump administration is seeking to achieve laudable goals with the tariffs but added that they ultimately are inflationary. Anything that puts upward pressure on prices also puts upward pressure on interest rates and, most importantly, project financing costs.

Arguably the biggest decision looming in Washington is the pending expiration of the Infrastructure Investment and Jobs Act on Sept. 30, 2026, right in the heart of the midterm election cycle. How the government approaches its renewal could shape the construction industry well beyond 2026, for better or worse.

The pessimist in me could be wrong. Interest rates could drop, clarity could cut through Washington and 2026 could be a huge year for the industry. But when people much smarter than me say prepare for the worst, I grab an umbrella while hoping I won’t need it.