Billion-Dollar Data Centers Prop Up CRE Construction Outlook

Commercial real‑estate construction is expected to see flat or minimal growth this year, but data centers defy that rule.

FMI Corporation projects that construction spending on offices, hotels, apartments and warehouses will fall in 2026, extending a multiyear slowdown, the Wall Street Journal reported. Data centers are the lone major exception.

Driven by surging demand behind artificial intelligence platforms, the construction of data centers remains largely insulated from rising costs. Analysts note that Amazon.com, Google, Oracle and other major users continue to deploy billions of dollars into new AI‑focused facilities.

“The cash is not an issue for these people,” said FMI’s Jay Bowman to the outlet.

FMI forecasts a 23 percent uptick in data‑center construction spending in 2026, pushing the sector to more than 6 percent of all nonresidential building activity — up sharply from 2 percent in 2023. The scale of these projects is transforming the construction landscape. Data centers often exceed $1 billion in cost and require thousands of on‑site workers, far surpassing the size and labor intensity of typical commercial projects.

Much of the construction budget lies in the extensive electrical infrastructure — substations, generators and power systems — that the facilities require.

Outside of data centers, investment in nonresidential structures has barely grown since 2020. Currently, higher interest rates, elevated material costs and labor shortages continue to suppress new development.

But even the subsector’s boom faces constraints. Tight labor markets threaten construction timelines, particularly as firms report workforce losses tied to stepped‑up immigration enforcement.

A third of contractors surveyed by the Associated General Contractors of America said immigration actions affected their operations, and nearly a quarter reported subcontractor employee losses. AGC is urging President Donald Trump’s administration to create a new guest‑worker visa program, noting that net U.S. migration in 2025 was likely negative for the first time in 50 years.

Tariffs are another pressure point. Forty percent of firms raised bid prices last year in response to actual or proposed tariffs, with materials such as aluminum, steel, copper and lumber seeing the steepest increases when imports are required.

Overall nonresidential building construction is projected to reach $844.4 billion this year, a nominal 0.14 percent increase from 2025, according to FMI, but a decline in real terms when adjusted for inflation.

– Joel Russell