4 Trends Shaping Growth in Engineering & Construction

Deloitte’s 2026 Engineering & Construction (E&C) Industry Outlook points to a defining challenge for the year ahead: Demand is shifting faster than the industry’s delivery capacity. After early momentum in 2025, the market softened: Real value-add reached U.S. $890 billion in Q2 2025 (up 1% year over year) while real gross output totaled $1.732 trillion (down 0.6%). By July 2025, total construction spending was down almost 3% year over year, led by declines in commercial (–8.2%) and manufacturing (–7%) construction.

At the same time, pockets of growth are emerging. AI-driven data center construction, and the energy infrastructure required to support it is expected to be a source of demand in 2026, alongside selective opportunities in advanced manufacturing, healthcare and defense. Investment in structures is projected to pivot from a decline in 2025 to modest growth of nearly 1.8% in 2026.

Amid rising material costs, persistent labor shortages and shifting project demand, Deloitte’s outlook highlights four trends that E&C firms may consider while planning their growth strategies.
 

1. Evolving Tariffs

Tariffs may influence job costs and project schedules. Recent tariffs impacted construction material costs, such as 50% tariffs on steel and aluminum. In 2025, the effective tariff rate for construction goods climbed to a 40-year high of 25% to 30%. Despite additional trade deals and reciprocal tariff modifications, the cost of many core construction materials remains elevated. Cost shifts have contributed to shifting project decisions. Project abandonment activity increased in 2025, leading to budget and forecast revisions, and nearly half of engineering and construction executives surveyed by Autodesk described their supply chains as fragile and undiversified.

In response to these pressures, some E&C firms are shifting from ad hoc reaction to repeatable resilience strategies. Some are using strategic stockpiling to buffer price swings, substituting cost-effective alternatives where feasible, expanding vertical integration and increased domestic sourcing, and diversifying suppliers through collaborative scenario planning. Some firms are also refining procurement models (including outsourcing in engineering, procurement and construction or hybrid structures) to help improve cost predictability.

Contracts are another part of the playbook. More builders are incorporating tariff-adjustment or escalation clauses to reduce exposure to cost increases. Where these clauses are absent, contractors may absorb the full impact, potentially impacting timelines or redesigns.
 

2. Shifting Project Priorities

Construction priorities are shifting under a mix of social, economic, technological, geopolitical and policy developments, with a pivot toward data centers and the infrastructure necessary to support them. The growth of AI and hyperscale computing is changing where capital flows and how labor and resources are allocated across the industry.

Some large firms are responding by reassessing portfolios and investing to compete for megaprojects such as data centers and advanced energy facilities. Many are deepening partnerships around emerging power generation and cooling technologies as they engage with hyperscalers and data center developers. To manage complexity and scale, some firms are increasingly leaning more on digital tools, modular construction and strategic partnerships.

Even as overall commercial construction slowed for much of 2025, data centers and energy infrastructure surged, fueled by rapid AI adoption, increased cloud demand and rising energy needs. The energy requirement is central. By 2035, power demand from U.S. data centers could grow more than fivefold to 176 gigawatts, from 33 gigawatts in 2024; AI data centers are expected to account for most of that increase, potentially reaching 123 gigawatts. That scale expands the opportunity beyond building shells into grid upgrades and related energy infrastructure.

Other segments are moving at a different tempo. Manufacturing construction tied to reshoring policy remains a focus area, though activity has been subdued as businesses weigh timelines, material costs and supply chain reestablishment. Office, retail and mixed-use properties are expected to see moderate, regionally driven growth and office-to-residential conversions remain strong in high-vacancy markets.
 

3. Embracing Digital Transformation

Margin pressure from policy shifts and supply chain disruption is playing a role in rethinking operating models, even as demand rises across data centers, grid-modernization megaprojects and advanced manufacturing. Digital tools are the lever to raise productivity and protect profitability.

The technology stack is becoming more operational for some. Some firms are deploying AI-driven analytics, real-time project management platforms and connected jobsite solutions. Many are piloting agentic AI to manage complex scheduling and coordinate workflows, while safety-focused computer vision can identify hazards quickly. Digital workflows integrating building information modeling (BIM), 3D printing and digital twins are improving planning and reducing rework, with timeline reductions of up to 20% cited.

However, poor quality data can undermine analytics and AI reliability. Capturing the “digital dividend” requires data governance, workforce development, ecosystem partnerships and performance metrics embedded across delivery.
 

4. Managing Talent Shortage

Labor shortages remain a capacity constraint within the industry. Wages rose 4.2% year over year as of August 2025, and the industry could potentially lose nearly $124 billion in output due to unfilled positions if the gap persists.

Demographics sharpen the challenge: By 2031, 41% of current construction workers are expected to retire, while only 10% of current workers are under 25, and only 7% of potential job seekers consider construction careers. Concentrated demand is intensifying labor pressures, as large-scale projects compete for scarce electricians, welders and HVAC technicians. Projections indicate a potential shortage of over 2 million skilled craft professionals by 2028 if current trends persist. Immigration policies remain a potential factor as well, as nearly 10% of construction and extraction workers are foreign born, according to the Bureau of Labor Statistics.

The emerging response combines hiring with redesigning delivery models. Some firms are accelerating investment in automation and digital tools, autonomous equipment, robotics, AI-powered scheduling, and prefabrication where feasible. Within engineering functions, AI-driven design tools and augmented reality field instructions can support “learn-as-you-install” workflows. At the same time, these shifts are increasing demand for digitally skilled talent, intensifying competition with technology companies and raising the premium on upskilling.
 

Building Resilience & Agility for 2026

A common thread across these trends is that resilience is becoming operational rather than aspirational. Financial agility, maintaining liquidity, managing debt wisely and leveraging legislative incentives provides the flexibility to respond to uncertainty, while strategic mergers and acquisitions focused on strengthening digital capabilities can expand competitiveness.

AI is an accelerant across all four trends. From optimizing designs, automating calculations and managing schedules in real time, AI-enabled tools are reshaping how work is delivered. On jobsites, automation is expected to become increasingly visible, helping to address labor shortages while improving safety and performance. In 2026, the organizations that integrate sourcing, delivery, data and workforce in a unified, AI-enabled operating model could be well positioned to win complex work — and deliver it with confidence.