AIA Lowers Outlook for Commercial Construction in 2026

Washington, DC, July 21, 2026—The nonresidential construction market continued to face headwinds during the first five months of 2026 as spending fell 7% in nominal dollars compared to the same period a year earlier.

The American Institute of Designers (AIA) tracks activity among design firms.

Reflecting this softer market performance, the AIA Consensus Construction Forecast Panel lowered its 2026 projection from a 1.0% increase in spending, forecast in January, to a 0.3% decline. Despite near-term challenges, panelists expressed greater confidence in a rebound next year, increasing their 2027 spending forecast from 2.2% to 3.0%.

Manufacturing construction experienced the most significant downward revision in the current forecast. Spending in the sector is now projected to decline 11.6% in 2026, following a 6.7% decrease in 2025, with an additional 0.6% decline expected in 2027. Despite these reductions, manufacturing activity is anticipated to remain elevated by historical standards. The projected slowdown reflects a normalization of spending following the surge in investment spurred by the CHIPS and Science Act and the Inflation Reduction Act. Adding to that moderation is ongoing uncertainty surrounding tariffs and trade policy, which can significantly influence decisions to move forward with large-scale, multiyear capital projects.

The institutional sector, driven largely by public construction activity, remains largely unchanged from the January forecast, with spending projected to increase 2.8% in 2026 and 2.7% in 2027 following 1.9% growth in 2025. Healthcare and amusement and recreation projects continue to offer the strongest growth prospects. In contrast, the commercial sector outlook has improved since January, with spending now expected to increase 4.8% in 2026 and 5.8% in 2027. However, that strength is being driven almost entirely by surging data center construction. Excluding data centers, commercial spending would be projected to decline 1% in 2026 and grow only 1% in 2027, underscoring the widening divide within the nonresidential building market.

“The unevenness we’re seeing in construction activity reflects very different market forces at work,” said AIA chief economist, Richard Branch. “Projects tied to public funding, healthcare needs, and AI-related investment are moving ahead, while sectors that depend more heavily on private financing and discretionary spending continue to face significant headwinds.”

View complete details of the latest Consensus Construction Forecast.