2026 construction industry outlook: It’s time to break your bad habits
Growth in the construction industry plateaued over the past year — and in 2026, look for that trend to continue. Faced with labor shortages, supply chain issues and economic pressures like high interest rates and tariff uncertainty, construction will need to adopt more disciplined habits and embrace both technological and cultural innovation in order to thrive.
However, the next 12 months should also bring opportunities as well as challenges. After two interest rate cuts in 2025, more should be on the way, along with growing investor interest in the construction industry from private equity firms. And in this era of unstable international trade, construction continues to hold one huge advantage over other sectors: You can’t ship construction work overseas.
Keep reading to learn more about the outlook for construction in 2026 and how firms can adapt to meet the moment.
What are the key trends and opportunities that will shape the construction industry in 2026?
In 2026, the construction industry will likely benefit from trends like interest rate cuts, more private equity investment and the ripple effects from data center construction. As more baby boomer owners retire, firms will also need to consider succession planning or other transition opportunities.
Here are more details on key trends to watch for over the next 12 months:
- Interest rate cuts: The Federal Reserve already cut interest rates twice in 2025 and has signaled more are likely to follow. High interest rates have significantly impacted profitability and project feasibility throughout the industry, so cuts will give firms the opportunity to refinance low-interest-rate debt from the Covid-era maturing in 2026 at rates better than expected and increase the viability of future projects proceeding to the construction phase.
- M&As and private equity investment: Private equity firms have shown increasing interest in the construction sector, especially in specialty trade contractors. Look for more investment in construction firms in 2026 from both PE and other construction firms looking to grow through consolidation. Across sectors, PE firms are currently finding fewer high-quality deals available than in years past, so if your financials are in good shape and you operate in certain construction disciplines, you could draw significant attention.
- Data centers create ripple effects: Large construction firms are feasting on data center contracts. But the data center boom holds promise for smaller firms as well. With larger rivals tied up doing data center work, there is often less competition for smaller projects, leaving middle-market construction companies free to split the spoils between themselves.
- Growth in multifamily, industrial and infrastructure: Multiple states, including California, have passed legislation to make it easier to build multifamily housing. Tax changes in 2025, include 100% bonus depreciation and the new qualified production property rule, should also spur construction opportunities in sectors like manufacturing. Continued population sprawl in certain areas of the United States will further drive demand for many construction sectors, including residential, industrial, and infrastructure.
- Outsourcing: As more long-term accounting personnel, such as controllers, retire, construction firms are finding their institutional knowledge difficult to replace on the hiring market and will likely look to outsourcing firms as a way to fill that gap. Firms will often also benefit from outsourcing higher-level roles like CFOs to provide strategic guidance and deliver forward-thinking financial planning cost-effectively.
- Technology: New and evolving tech solutions, especially around AI and automation, can help construction firms work smarter, safer and more efficiently. This is an area that holds promise for both in-office capabilities and job site work, so look for more firms to explore their options and make targeted upgrades to improve their capabilities
What challenges will construction need to overcome in 2026?
Tariffs and broader economic uncertainty will likely continue to significantly impact construction in 2026. Firms will also have to navigate ongoing labor shortages and retention issues, along with cash flow challenges brought on by bad habits laid bare by a slowdown in industry growth.
- Uncertainty: The political and economic climate is broadly uncertain. Most of the growth in the economy is related to the AI industry, which analysts increasingly worry is overvalued, so a correction could have a widespread impact, including on data center construction contracts.
- Tariffs: Tariffs have roiled the business world, raising costs and decreasing predictability. While the Trump administration’s tariff authority is currently being litigated before the Supreme Court, the outcome is uncertain, and even a ruling limiting the administration’s ability to impose tariffs can’t restore trade to where it was a year ago.
- Labor shortages: Construction has long struggled with labor issues. But recently, the White House’s aggressive immigration policies have hit construction especially hard, given that roughly 25% of construction workers — and one in three craft workers — are foreign-born. Firms are also facing the reality that many older skilled workers are retiring, with less appetite among younger workers to replace them.
- Cash flow issues: Construction had several boom years in a row, a trend that essentially ended in 2025. As a result, firms with bad habits around cash flow management will find that they can’t get away with that anymore, instead requiring more in-depth cash flow oversight and forecasting. It’s essential to know where you stand from a cash flow perspective to best manage working capital and anticipate your future cash needs.
How should construction firms adapt to succeed in 2026?
Construction firms, especially in the middle market, that want to succeed in 2026 should embrace cultural and technological innovation. Adapt or die, as the saying goes, and that mindset is as relevant now as ever. A willingness to change will help firms overcome uncertainty and the changing economics of the construction industry to seize new opportunities that arise.
1. Create a more innovative, exciting culture
Construction is hardly the only industry facing labor challenges. But construction as an industry is often slower to change than most (understandably, given construction faces job safety risks that most other sectors don’t), which means that for younger workers, it can feel like a less engaging choice.
An emphasis on strengthening your culture can help change that. Given the choice between two job opportunities of roughly equal pay, people will usually pick the company that makes them feel more valued, appreciated and like a part of something positive that’s larger than themselves.
Ask yourself: How can you create more of that feeling inside your own business? This question isn’t just fluff. Your answer will help determine whether you can successfully appeal to a younger generation and give your business a forward trajectory.
Consider the opportunities that construction can provide young people, specifically. Many young adults are drowning in student loan debt. Construction offers the opposite: the chance to learn a valuable trade while getting paid to do it. Does your company create those opportunities?
And while you’ll hear a lot in 2026 about how you need to upgrade your technology (more on that in a moment), getting the most out of your systems also starts with culture. Even AI will do nothing for you without the human element — people willing to experiment, question established processes and systems and explore how new solutions can better solve old problems.
2. Get smarter about technology
Construction firms don’t necessarily need to invest in new technology to succeed in 2026. But you do have to get clear on what you don’t know.
Start out by thoroughly assessing your current systems. Think in terms of problems and solutions: What business obstacles do you currently face, and are your systems helping you overcome them?
You probably already have an enterprise resource planning (ERP) platform, for example. That doesn’t mean you’re fully integrating its capabilities into your workflows. Platforms have added AI and automation features in the last year or two that can make elements of what you do simpler and faster. But are you using them?
Talk to an advisor as a part of this process. An advisor can help you find your blind spots, like gaps in your current systems, underutilized existing capacities and how to implement newer technologies like AI-driven automation to work more efficiently.
This collaboration can also help you create an enterprise-level tech strategy to make sure your whole team is aligned and addressing tech in a thoughtful, problem-focused way.
Training and upskilling your team are essential here as well. Upskilling doesn’t just help your team use tech like AI more effectively, but also makes you more attractive when recruiting talent (especially among younger generations) and helps create growth opportunities for existing employees that will aid your retention efforts.
And finally, don’t sleep on cybersecurity. With cyberattacks essentially inevitable, taking steps to ensure your defenses are prepared will help you identify breaches more quickly to better limit damage and associated costs.
3. Focus on cash flow and financial clarity
Learning how to get the most out of your systems can give you greater financial clarity, including around cash flow. This can deliver more predictability and help you avoid risk around unexpected costs.
Having a solid balance sheet is critical, as firms are facing more scrutiny on financial health from lenders, sureties, owners, and general contractors. Understanding your costs, putting a higher focus on billing and collection hygiene and diligent project management will be crucial to mitigate potential cash shortfalls and help ensure financial stability.
Bringing on a financial advisor experienced in the construction industry can help here (to do this cost-effectively, more construction firms are turning to outsourcing). A construction financial advisor will help get the most out of your accounting software and ensure your financial reporting is accurate, oversee your balance sheet and cash flow statements and keep an eye on your work in progress schedule to watch out for cost overruns.
From a financial risk-mitigation perspective, some construction firms are also exploring subcontractor default insurance (SDI), including having it run through a captive insurance program rather than traditional bonds. You probably don’t need to do this with a subcontractor you have a long relationship with, but for new partners, this approach can help you keep unexpected problems from damaging your balance sheet.
How Wipfli can help
We help construction firms improve financials, work more efficiently and develop stronger cultures. Let’s talk about your challenges and goals for 2026 and come up with a plan to get you where you want to go. Start a conversation.
Let’s win 2026 together
