Construction spending across the U.S. has slowed, but cost pressures remain elevated and uneven across regions, according to Turner & Townsend's second-half 2025 U.S. construction market intelligence report.
The report noted the impact of softening macro conditions on the construction market, including GDP growth slowing to a 1.4% annualized rate in Q4 2025, while construction spending ended the year down 0.36% year-over-year. Private construction was the primary drag, declining nearly 3% annually, as higher financing costs and weaker project pipelines weighed on activity.
Manufacturing saw the sharpest year-over-year pullback, falling more than 11% to $202.4 billion, marking the steepest decline across major non-residential categories. Healthcare also softened, slipping 1.4%, while office edged up 2.4%, signaling a modest stabilization rather than a rebound.
Public construction helped offset broader weakness, rising 3.5% to 4% year-over-year, supported by federally backed infrastructure programs. Transportation spending increased 5.3%, while power construction rose 5.8%, driven in part by grid modernization and continued data center-related energy demand.
Within that mix, select sectors remain expansionary even as the broader market cools. Amusement and recreation rose 6.1%, reflecting continued investment in entertainment and sports facilities.
Despite weaker demand, cost escalation remains elevated. Turner & Townsend forecasts bid price inflation of 4.25% in 2026, easing only gradually to 4% in 2027 and 3.75% in 2028, as tariff pressures, labor constraints and financing conditions persist.
Materials inflation continues to be shaped by tariffs and supply chain shifts, particularly in steel, aluminum and copper. Labor remains tight despite cooling activity, with wage pressure persisting in key regional markets. At the same time, capital conditions are limiting developers' ability to absorb higher costs or accelerate stalled pipelines, the report noted.
Meanwhile, the slowdown is uneven geographically. Phoenix, Dallas–Fort Worth and San Francisco are expected to experience the highest bid price escalation over the next 12 months, driven by overlapping demand from data centers, infrastructure expansion and constrained labor and supply chains.
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