2025
FINANCIAL REVIEW & FORECAST
2026
National Construction Outlook
Dodge forecasts uneven construction performance in 2026 Provided by Dodge Construction Network
A
fter posting healthy growth in 2024, the U.S. economy markedly weakened throughout 2025. Consumer spending was stagnant, housing sales slowed considerably and the job market continued to weaken. Risks remain elevated to the downside for the construction industry nationally in 2026, although a few bright spots – such as data center and power construction, as well as high-value megaprojects – will allow the sector to remain afloat. After expanding by 6.1%, the total dollar value of construction starts remained flat for 2025, down 0.35% to $1.24 trillion. When removing inflation, however, real activity declined by 0.9%. Nonresidential starts were expected to grow by 3.7% for 2025 and 1.2% in 2026, but that’s largely driven by strength in data center activity and megaproject construction. In real terms, nonresidential construction declined by 5.7% in 2025, but should expand by 2.3% in 2026. Finally, residential construction declined by 0.8% in unit terms, following a marked slowdown in single-family construction, offset by steady gains on the multifamily side. Economic policy uncertainty dominated the bulk of 2025 and has blunted
the impact of large government investments, including the Infrastructure Investment and Jobs Act (IIJA) and the CHIPS Act, which promoted substantial growth in construction. The process for establishing new trade deals has also been rocky, with tariffs frequently being hiked and scaled back. Businesses, in aggregate, have been cautious about taking on new
Commercial, Institutional & Industrial Floor Covering Provider & Installer
Specializing in the healthcare marketplace with the highest quality & best service since 1989. We provide 24/7 service & installation. Call us today to take advantage of our trained in-house staff and extensive library of product information. Complete line of flooring including: Athletic Floors Resilient Flooring • Vinyl & Ceramic Tile • Carpeting
Call today for a FREE estimate! 4300 Brookpark Rd., Cleveland, OH 44134 • 216-595-0100 • Toll Free 888-271-8200
56
investments and overextending their activities. As market participants and consumers get used to the heightened levels of uncertainty, they will become more active, however higher borrowing costs through risk premiums will rise, making investment more challenging. Dodge assumes the effective tariff rate will peak in 2025-Q4 at 15% and that it will remain elevated for longer than previously expected. The effective tariff rate will remain at an average of 15% through 2026, declining to roughly 8% by 2030. The extended timeline for normalization of tariffs has led to some sector revisions, yielding a weaker overall construction forecast. The One Big Beautiful Bill Act (OBBBA) will provide a very modest short-term economic boost while creating significant long-term economic challenges due to higher deficits and debt. There are some potential upsides for the construction industry, but the degree to which the bill will be stimulative remains unclear. In addition, the full impact of the bill on the construction industry will not be felt until 2027 when the changes to qualified opportunity zones go into effect. The bill’s most concerning economic aspect is its massive fiscal cost and distributional effects that could severely damage the economy’s future. The distributional impact is particularly troubling, as the Yale Budget Lab estimates the top income decile will gain 2% in after-tax income (about $12,000 annually) while the lowest earners will lose more than 3.5% (about $1,000 annually). This will exacerbate income and wealth inequality that has been increasing since the 1980s, likely trickling into the housing market Properties | January 2026