With construction costs remaining high in recent years, do you foresee a meaningful rebound in construction activity in 2026?
DEREK G. WEISBENDER, REAL ESTATE PARTNER
“In the data center space, demand for capacity continues to overshadow increased costs of building materials and equipment. At some point, the more ambitious projects may not pencil, but that won’t be in 2026 or 2027, so long as powered land is available. Other sectors like office and multifamily have thinner margins and are more sensitive to tariffs, but we still see those proceeding (albeit more cautiously), with savvy owner-developers mitigating the cost risk through timely buyouts and early procurement, and even turning to alternative designs like mass timber. Most signs point up for 2026 despite costs, but to varying degrees depending on the product type.”
DAVID M. NORTON, REAL ESTATE SENIOR COUNSEL
“Despite high construction costs, I anticipate an overall uptick in construction activity in 2026. Data centers will continue to see historic demand drive new projects, and other product types, like infrastructure, healthcare, and industrial, will likely see overall steady growth, albeit slightly tempered by higher construction costs. For sectors already facing market and structural headwinds, such as office and certain types of multifamily, high construction costs will likely play a larger role in limiting new projects. One potentially positive factor is that the anxiety surrounding tariffs and material price increases has largely waned in the closeout of 2025. Although many owner‑developers are still contractually mitigating against those risks heading into 2026, this perceived stability in pricing may help certain projects come online in the next year.”
KLED BACI, REAL ESTATE ASSOCIATE
“My construction outlook for 2026 remains cautiously optimistic. Although the industry is facing headwinds from rising construction costs, most of the trade and tariff concerns are behind us, and the Fed’s plan to cut rates could act as a further boost to development. Arguably more importantly, there continues to be growing demand in the data center space, with many of our clients increasing their build-out of this critical infrastructure. The growth in construction and development projects going into 2026 will likely be industry and geography-specific, but overall, I anticipate a strong rebound in activity.”