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📡 Data Centers are Dominating the Nonresidential Construction Market
Data center construction spending jumped another 6% in July and now represents 10% of all private nonresidential construction activity. Sage reports that data center spending has grown at an astonishing 116% annual rate since March. Over the past year, data center spending increased 57% ($27.3-billion) while spending on all other nonresidential construction declined 3.5% ($43.7-billion).
The boom is also creating a noticeable divide among contractors. Only about 12% of contractors currently have data center work, but those firms report an average backlog of 11.4-months, compared with 7.5-months for contractors without data center work.
What This Means for MBEX Members
The data center boom is pulling capital, labor, and specialty trades toward a relatively narrow slice of the market. For contractors who aren't chasing hyperscale projects, this could mean competing harder for skilled workers and equipment while looking for opportunity in other sectors still moving.
🪙 Construction Spending is Weaker Overall & Data Centers are Masking Some Of It
Sage reports that total construction spending fell for the second consecutive month in July and was down 3.8% year over year.
The residential side is taking the bigger hit, falling more than 7% year over year, with single-family construction particularly weak. Nonresidential construction was somewhat more resilient, edging up 0.1% in July and sitting just 1.3% below July 2025 levels. But Sage points out that this relatively strong performance is entirely attributable to data centers.
There's an interesting wrinkle, however. Sage argues that the data center boom itself may be contributing to weakness elsewhere. Massive AI-related investment is absorbing capital and putting pressure on borrowing costs. If the AI / data center buildout eventually slows, some of that capital could become available for other construction segments.
What This Means for MBEX Members
The headline numbers are being heavily influenced by one extraordinary sector. Sector-by-sector opportunity matters more than the overall construction-spending number at present.
🧰 Construction Labor Costs are Heating Back Up
Construction labor-cost escalation, which cooled considerably from late 2022 through late 2024, has reversed course. Average hourly earnings for non-managerial construction workers are now up 5% year over year.
Specialty trades are feeling the biggest pressure. Electricians are up 7.3% year over year, with Sage specifically connecting much of that escalation to the data center boom. At the same time, the share of construction jobs going unfilled is near a two-year high, roughly comparable to 2019 levels when construction labor was already difficult to find.
What This Means for MBEX Members
Estimating, staffing, and project scheduling all get trickier when specialty-trade wages are climbing and available workers are scarce. Contractors may want to revisit labor assumptions in estimates and be especially careful about locking in work without accounting for potential labor escalation.
⛽ Fuel Costs are Becoming a Problem (Again)
Sage's September reports contain some particularly unpleasant news for anyone who operates trucks, equipment, or fleets.
Diesel prices climbed above $6 per gallon nationally for the first time, with Sage calling it an all-time high. Gasoline reached $4.46 a gallon at one point during the month, and oil prices remained above $100 per barrel.
The broader concern is that higher fuel prices don't stay at the pump. They feed into transportation, materials, equipment operation, and ultimately, project costs.
- More on Pages 13, 23, 35, 53
What This Means for MBEX Members
Fuel isn't something to treat as a minor overhead fluctuation. Equipment-heavy contractors and firms with significant hauling or delivery costs should be paying close attention to how fuel assumptions affect project margins, particularly on longer-duration projects.
🛍️ Inflation is Still Making the Cost Picture Messy
Producer prices roses sharply in August, with increases concentrated in goods. Consumer prices also rose faster than expected, with energy prices playing a significant role. Core prices, excluding food and energy, also accelerated, reaching their fastest pace since May.
Sage also points to comments from manufacturing and services managers suggesting that goods and input prices could continue moving higher, with tariffs and oil markets adding to the uncertainty.
- More on Pages 1-5, 22-25, 36
What This Means for MBEX Members
Yet another reason for keeping estimates, supplier quotes, and escalation assumptions current. A bid based on yesterday's materials or fuel pricing can become a very different animal by the time procurement actually happens.
🏦 Interest Rates Aren't Giving Construction Much of a Break
The Fed raised its target rate by 0.25 percentage points in September, the first rate hike since 2023. Sage says inflation continues to move away from the Fed's 2% target, while unemployment remains relatively healthy.
At the same time, 10-year Treasury yields climbed to levels not seen since 2007, and Sage's conclusion was blunt: borrowing costs are going to keep rising.
What This Means for MBEX Members
Higher borrowing costs can affect developers' willingness to move forward, financing for projects already in the pipeline, equipment purchases, and expansion plans. It makes the projects that do move forward potentially more valuable, but also makes owners more sensitive to price, schedule, and financing risk.
💪 The Labor Market is Still Surprisingly Healthy
U.S. employers added 162,000 jobs in August, beating expectations, while unemployment remained around 4.1%.
Construction was among the industries contributing to private-sector job growth, although overall employment gains remain heavily concentrated in healthcare and leisure / hospitality.
What This Means for MBEX Members
A healthy labor market is good for demand, but it also means construction companies aren't suddenly going to find a giant pool of unemployed workers waiting to fill open positions. The industry's labor shortage remains a structural challenge even while the broader economy performs reasonably well.
🛠️ Manufacturing Has Some Momentum, But Labor Remains a Problem
Manufacturing activity expanded for the eighth consecutive month in August, which is encouraging for industrial construction. Industrial production was also up 1.4% year over year in August.
Sage's Summer Q&A adds some important context. They say continued reindustrialization could support economic growth for years, but manufacturers are still struggling to find workers. Manufacturing employment has actually fallen by 265,000 jobs since the beginning of 2023 despite the difficulty companies have filling industrial positions.
- More on Pages 8, 15, 39, 41-42
What This Means for MBEX Members
Industrial construction remains an area worth watching, particularly for firms positioned to serve manufacturing, utilities, and related infrastructure. But labor availability isn't just a construction problem; it's part of the owner's problem, too, and that can influence where new facilities are built and how quickly projects move.
🗂️ AI Might be Changing Construction Differently Than Other Industries
Sage's Summer Q&A offers an interesting observation for contractors: when asked which occupations are most vulnerable to AI over the next one to three years, Zack Fritz identified administrative office work as the most likely area to see job reductions.
He specifically described construction and healthcare as among the fields safest from AI-driven job displacement.
That doesn't mean construction is immune to AI. Quite the opposite. The same report makes clear that AI is already driving an enormous amount of construction activity through data centers.
- More on Pages 40-51 (Summer 2026 Q&A)
What This Means for MBEX Members
The more likely near-term story isn't AI replacing construction workers; it's changing how construction companies work, while simultaneously creating enormous demand for physical construction. That could make technology adoption, productivity, and skilled-worker development increasingly important competitive advantages.
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