Commercial construction across the U.S. has slowed to a near halt as higher interest rates, rising material costs and tight labor market weigh on projects. But one sector continues to attract developer attention: data centers.
Driven by surging demand for artificial intelligence, major tech companies are absorbing higher construction costs to expand capacity for hyperscalers — large-scale cloud computing providers such as Amazon, Google and Oracle, according to a report from The Wall Street Journal. These companies continue to finance billions of dollars in AI-focused development, industry executives and construction analysts said.
Spending on data center construction is projected to rise 23% in 2026, while spending on offices, hotels, apartments and warehouses is expected to decline, according to construction consulting firm FMI. Data centers are forecast to account for 6% of all nonresidential building construction, up from 3% in 2023.
“Data centers can cost more than $1 billion to build and employ thousands of workers on the site,” said Andy Halik, president of Chicago-based construction company Skender, in The Wall Street Journal.
By contrast, Skender’s other large-scale commercial projects typically cost hundreds of millions of dollars and employ hundreds of workers. Much of the higher cost stems from electrical infrastructure, including power substations and backup generators, required to support these facilities.
The booming demand for data centers may also strain an already tight construction labor pool, with many firms reporting the effects of stricter immigration policies. A survey of more than 900 construction companies by the Associated General Contractors of America found that a third of firms experienced operational impacts from immigration enforcement in the past six months. Tariffs also continue to influence projects, with 40% of firms raising bid prices in response to actual or proposed tariffs last year, while only 11% absorbed the cost increases themselves.
Overall, nonresidential building construction — which includes healthcare and educational facilities as well as a mix of public and private buildings — is projected to total $844.4 billion in 2026, a 0.14 % increase from 2025. Adjusted for inflation, however, this represents a real decline in construction activity, FMI said.
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