Simonson: Data Centers and Power Projects Prop Up Weak Construction Market

Date Posted: November 3, 2026

Posted In: Discussion,

Construction spending is increasingly a tale of two industries, with booming data center and power projects offsetting weakness across much of the rest of the market, according to Ken Simonson, chief economist for the Associated General Contractors of America (AGC).

In a November 3 interview with Pit & Quarry, Simonson described a construction economy heading into 2027 with significant opportunities but growing challenges from materials costs, labor availability and uncertainty over federal infrastructure funding.

His assessment is reinforced by construction spending figures released November 2 by the U. S. Census Bureau and an analysis by Associated Builders and Contractors (ABC).

Simonson identified data centers, power generation and certain types of manufacturing as the strongest prospects for 2027. Residential construction, traditional commercial buildings and public infrastructure face a considerably less favorable outlook.

“I think data centers and power again will be the top two growth markets,” Simonson said.

A Boom That Conceals Broader Weakness

The latest Census Bureau figures underscore the uneven market.
Total U. S. construction spending fell 1. 1.9% in September to a seasonally adjusted annual rate of $ 2. 186 trillion, 2. 7% below September 2025.

Yet nonresidential construction spending increased 0. 0.6% during the month, reaching an annualize$ 1. 325 trillion, according to ABC.

Private nonresidential spending increased 1. 1.1%, while public nonresidential spending declined 0. 0.1%.

The growth was highly concentrated.

Data center construction spending jumped 8. 8.6% in September and was 90% higher than a year earlier, according to AGC’ s analysis. Private electric power construction increased 1. 1.3% for the month and 14% year- over- year.

All other private nonresidential categories combined declined 0. 0.2% in September and 7. 7.8% over the preceding 12 months.

ABC Chief Economist Anirban Basu said nonresidential spending has now increased for six consecutive months, but the apparent strength is misleading.

“As has been the case for several months, data centers accounted for virtually all of that increase,” Basu said.

ABC calculated that data center spending has grown at a 217% annualized rate since May.

Simonson Sees Continued Growth — With Limits

Simonson expects the data center boom to continue through 2027, although constraints on labor, equipment and materials will make current growth rates difficult to sustain.

The projects also create opportunities well beyond the buildings themselves.

Larger data centers increasingly are being developed in less populated locations, requiring access roads, utilities, electrical infrastructure and supporting facilities. Those projects can generate additional demand for aggregate producers, site contractors and other construction suppliers.

Power construction is another major opportunity.

Simonson expects investment in natural gas generation, solar energy, battery storage and potentially nuclear facilities, along with the transmission infrastructure needed to connect new capacity.

Manufacturing construction, which has declined sharply from its recent peak, could also begin recovering as investments expand in facilities supporting energy production, pharmaceuticals, defense and other specialized industries.

Traditional commercial construction presents a different picture. Office, hotel, retail and warehouse construction remain flat or declining in many markets.

Rising Costs Threaten Project Economics

Even the strongest construction markets face significant cost pressures.

Simonson pointed to an 8.9% increase in the producer price index for inputs to new nonresidential construction between August 2025 and August 2026. That was more than twice the 3.4% increase in the Consumer Price Index over the same period.

He cited fuel costs, tariffs and supply-chain constraints as major contributors.

Diesel prices affect virtually every stage of construction, from operating heavy equipment to transporting materials and hauling debris. Tariffs on steel, aluminum and copper-containing products have added further pressure.

Structural steel availability is also becoming a concern, with fabrication capacity heavily committed into 2027.

The result is a difficult environment for contractors and owners alike: costs continue climbing even as demand weakens in many construction categories.

Public Construction Faces Funding Uncertainty

Simonson also expressed concern about the outlook for highway and other publicly funded construction.

Federal infrastructure legislation provided substantial funding in recent years, but some of those resources are being exhausted. State and local governments face increasing budget pressures.

The highway and transit funding provisions of the Infrastructure Investment and Jobs Act expired on September 30, and Congress has enacted only a short-term extension rather than a new long-term authorization.

That uncertainty is making state transportation departments more cautious about advertising projects and awarding contracts.

September Census figures showed public construction spending down 0.1%, with highway construction down 0.3% for the month.

Simonson expects public construction spending to be flat at best in 2027, with highway contractors particularly vulnerable to delayed funding decisions.

What the Numbers Mean for 2027

The contrast between high-growth technology infrastructure and weaker traditional markets is becoming the defining feature of the construction economy.

Basu cautioned that the concentration of spending in data centers and power projects is likely to favor larger contractors with the resources and experience to pursue those projects.

Simonson’s outlook suggests that construction firms will need to pay close attention not only to overall spending levels but also to which owners and sectors are actually investing.

For 2027, he anticipates continued strength in data centers, power, and selected manufacturing markets, modest weakness in residential construction, and limited growth in public work.

Taken together, he expects at best only a small increase in overall construction spending.

The industry may remain busy, he said, but opportunities will be far from evenly distributed.