Is the Dramatic Slowing of Nonresidential Building Growth Real?

KEY POINTS

• Construction activity remained strong through much of the first half of 2026, with Nonresidential Building spending excluding Office starts growing by as much as 19% late in the first quarter.

• Growth metrics weakened by June not because the market collapsed, but because megaprojects over $1 billion have raised the spending baseline and made year-over-year comparisons more volatile.

• As megaprojects and data centers increasingly distort topline results, firms need deeper market context to separate meaningful trends from temporary noise in regional and subcategory data.

Construction activity through most of the first half of 2026 issued strong growth even after removing the out sized impact of data centers. Excluding Office starts—the category that includes data centers—Nonresidential Building spending over the latest 12 months, compared with the previous 12 months, grew by as much as 19% late in the first quarter.

That peak capped an acceleration that had been building for nearly a year. The strength of this upward climb was obvious in ConstructConnect’s Year to-Date Top 20 Subcategories graphic published last month in the Construction Industry Snapshot.

Across the top 20 categories this year it has been common to see almost three-quarters of all subcategories report some level of starts growth. However, as of June that figure fell into contractionary territory after reporting nearly 20% growth just three months prior.

The explanation for this has to do with the wave of megaprojects, defined as projects over $1 billion in total value, that are now a mainstay of the construction industry, account for almost one in every four dollars.

Beginning in mid 2025, a steady flow of multibillion-dollar projects pushed monthly nonresidential starts sharply higher. Over slightly more than the past year, Nonresidential Building spending has averaged $48 billion a month, well above the $33 billion monthly average recorded from mid-2023 through mid-2025.

This higher base is now softening broad measures of growth while also making year-over-year readings more volatile.

Monthly totals now swing more sharply because megaprojects do not enter the market evenly. Manufacturing shows the effect clearly: over the past 12 months, its year-over-year readings have ranged from 140% to -93% as monthly spending varied from a record $28 billion to as little as $2 billion.

Construction activity through most of the first half of 2026 issued strong growth even after removing the out sized impact of data centers. Excluding Office starts—the category that includes data centers—Nonresidential Building spending over the latest 12 months, compared with the previous 12 months, grew by as much as 19% late in the first quarter. Image: ConstructConnect

Rising volatility will make it harder for businesses to assess the health of the industry. In response, firms will need to back out sub-trends, the most obvious of which are the rising prevalence of megaprojects and data centers.

Market context will play an ever-larger role when evaluating regional and subcategory results where smaller spending levels can be greatly disrupted by even a single megaproject.

Importantly, when results change dramatically, as exemplified here, it is essential to first determine what is noise that can be ignored, and what is signal that needs to be considered.

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