Progress is Underway, Just Not at Full Throttle
While many anticipated that economic uncertainty in 2025 would slow engagement across the construction industry, it didn’t. Demand did not disappear, it merely became more selective. Owners and developers didn’t exit the roadway; they simply became more deliberate about which lanes they chose and how fast they were willing to travel.
Overall construction spending softened slightly, down approximately 1.8% compared to the same period in 2024. That said, activity has varied significantly by sector. Commercial and institutional work has experienced more nominal movement, while data centers and megaprojects have remained robust and resilient – continuing to push forward at speed while other sectors eased off the accelerator.
Federal interest rates remained the primary factor influencing private-sector spending. October marked the first dip into the 3% range, followed by a 25-basis-point cut at the Federal Reserve’s December 10 meeting. While rates stabilized by year-end, they remain higher than many in the private sector would prefer. As a result, lower rates at the close of 2025 are more likely to support refinancing efforts for projects already underway rather than to ignite a surge of new construction starts. In short, the engine is running, but many owners are waiting for clearer road conditions before pressing the gas.
The AEC industry once again demonstrates its ability to adapt, responding quickly to risks tied to political uncertainty, trade policy, and tariffs. Additionally, while universities, technical programs, and industry leaders are actively investing in the future skilled-labor pipeline, these initiatives are still gaining traction and have not yet closed the gap between workforce supply and accelerating demand. This challenge has not resolved itself and remains a key contributor to cost and schedule delays. Owners should plan accordingly, leveraging schedule and cost expertise to navigate workforce availability, productivity constraints, and associated cost impacts.
Looking ahead to 2026, the weakened design pipeline remains a notable trend. The Architecture Billings Index (ABI) continues to sit below 50, signaling fewer new projects entering design and slower-than-anticipated progression of existing work. This lag upstream reinforces the broader pattern we’ve seen: projects are not stopping outright, but they are advancing cautiously, often at reduced speed.
The takeaway from 2025 and into 2026 is clear: uncertainty can stall momentum, but it does not eliminate demand. Progress in the coming year will depend on the industry’s ability to move decisively: continuing proactive-investment to resolve skilled-labor shortages; anticipating reductions in federal interest rates to unlock renewed private-sector investment; and proactively managing procurement bottlenecks and project backlogs.
As long as the collective foot hovers just above the gas pedal, the industry will continue to roll forward, steady, controlled, and without sharp setbacks. But meaningful acceleration will require commitment. Progress is underway – just not at full throttle – and the next phase will be defined by deliberate decisions about when, where, and how hard to accelerate.
Curious about the specifics of your region? See below for hyperlinks to region-specific insights from our report.
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