AIA and Turner: Key Drivers of Growth in Construction

Weaknesses in growth in construction stem from a trifecta of challenges. According to the American Institute of Architects (AIA) a combination of cyclical pressure, structural shifts and policy have contributed to a pullback in non-residential spending.

"Real construction activity, that is boots on the ground, has been flat at best in the non-residential building space,” AIA Chief Economist, Richard Branch, said at the bi-annual Construction Economy Outlook event, referring to the past two years.

Challenges to growth in construction

Cyclical shifts include high interest rates and persistent inflation. They have cooled consumer demand, squeezed finances and pushed developers to delay or cut projects, says the AIA.

Structural shifts reflect a rapidly aging population, which is pushing up demand for healthcare. Meanwhile less immigration and stagnating workforce growth are raising the cost of labour, while lowering the availability of work.

Policy is also limiting growth as rising geopolitical risk, higher tariffs and increased immigration enforcement, and rising geopolitical risk all help to add uncertainty to project planning. 

The US-Iran conflict and the resulting spike in oil prices are currently compounding affordability challenges for businesses. 

Typically, a 10% year-over-year increase in Brent crude prices creates an extra 4% to 5% rise in construction material prices around three months later. 

On this basis, with oil prices rising 54% in April, 66% in May, and 36% in June year-over-year, construction could see a substantial rise in construction material prices by the end of the summer, says the AIA.

Rise in construction project enquiries

The Architecture Billings Index signals relative strength in project enquiries, the volume of which has climbed over the past two years. It indicates that developers and owners are keen to keep work progressing. 

However, enquiries are not always converting into billable work. Sometimes developers are put off progressing with projects, due to factors such as financing conditions, construction costs, budgets and wider economic risks. According to the AIA, more are delaying or shelving projects than proceeding.

It has come to the conclusion that spending across most nonresidential building categories will continue to remain under pressure for the rest of the year. It highlights that the market is not defined by “universal weakness”, rather, “uneven momentum”. 

What are the key drivers of growth in non-residential construction?

Data from Turner highlights the uneven momentum. The New York-based construction company has found certain market sectors have emerged as key drivers of growth.

They have been crucial in helping the Second Quarter 2026 Turner Building Cost Index rise to the value of 1552. 

The index measures costs in the US non-residential building construction market. The 1552 figure represents a 1.44% quarterly rise from the First Quarter 2026 and a 5.15% annual jump from the Second Quarter 2025.

"Demand remains strongest in data centres, semiconductors, advanced manufacturing, and mission-critical facilities, particularly in the Midwest and Southeast," says Attilio Rivetti, Turner Vice President who compiles the index.

“The industry's biggest challenge continues to be the availability of skilled mechanical and electrical labour.

“Looking ahead, owners and contractors will be watching material costs, tariff policy and supply-chain conditions closely. Uncertainty in these areas reinforces the importance of disciplined planning, early procurement and proactive risk management as projects move forward.”

The forecast for construction

AIA supports Turner’s findings with strong forecasts in data centre and critical facilities markets. 

For example, data centres have been rising exponentially over the last several years. 

AIA’s forecast suggests this will continue, increasing by 33% in 2026 and by 25% in 2027. By 2027, the AIA says they will account for roughly 8% of all nonresidential building spending. 

Falling under mission critical facilities, health care construction spending will climb by 2.6% in 2026, jumping to 4.4% in 2027, it predicts. 

Less strong is its outlook for growth in semiconductor and electric-vehicle-related plant construction. However, the market experienced a growth peak in 2024 and still is experiencing higher than historical growth levels. 

The AIA also sees hotel and amusement and recreation construction as key drivers for 2026 and 2027.