Engineering and Construction Industry Outlook Report by Deloitte Summary

The Deloitte 2026 Engineering and Construction Industry Outlook report details a sector at a critical crossroads, balancing significant growth opportunities against a complex array of macroeconomic and structural pressures. While the industry faces persistent challenges such as high material costs, a widening labor gap and tariff-related supply chain disruptions, a surge in demand for AI-driven data centers and energy infrastructure is providing a powerful new momentum. To navigate this environment, the report emphasizes that firms must transition from traditional, labor-intensive models to digitally-enabled ecosystems by embracing technologies like agentic AI, building information modeling (BIM) and robotics. Let’s check out some key insights and data points from this report.

Key Insights:

• Sector Valuation: Real value added by the construction industry climbed to US$890 billion in Q2 2025, a 1% year-over-year increase.
• Gross Output: Real gross output reached US$1.732 trillion in early 2025, reflecting a 0.6% decline.
• Spending Decline: Total construction spending fell by nearly 3% year-over-year as of July 2025.
• Commercial Downturn: Commercial construction spending saw a significant drop of 8.2% while manufacturing construction spending decreased by 7%.
• 2026 Growth Projection: Investment in structures is expected to pivot from a 2025 decline to modest growth of nearly 1.8% in 2026.
• Tariff Peaks: Recent tariffs on essential materials like steel and aluminum have reached as high as 50%. The effective tariff rate for construction goods hit a 40-year high of 25% to 30% in 2025.
• Project Abandonment: There was an 88.2% year-over-year increase in project abandonment activity in August 2025 due to elevated costs.
• Supply Chain Fragility: Nearly 50% of E&C executives classify their supply chains as fragile due to geopolitical tensions.
• Planning Surge: Commercial and institutional planning activity increased by 30% year-over-year in August 2025, signaling future growth.
• Data Center Power Growth: Power demand from US data centers is estimated to grow more than fivefold, from 33 gigawatts in 2024 to 176 gigawatts by 2035.
• AI Data Center Demand: Power needs specifically for AI data centers could grow thirtyfold, reaching 123 gigawatts by 2035.
• Timeline Efficiency: Implementing digital workflows like BIM and digital twins can reduce project timelines by up to 20%.
• Labor Gap 2025: The industry needed 439,000 new workers in 2025. The projected need for new professionals will intensify to 499,000 by 2026.
• Wage Increases: Construction wages rose 4.2% year-over-year as of August 2025.
• Economic Loss: The industry could potentially lose nearly US$124 billion in output due to unfilled positions.
• Total Employment: The total employment in the construction sector stood at 8.3 million as of August 2025. There were 188,000 job openings in August 2025, a 38.2% decrease from previous periods.
• New Hires: The industry also saw 353,000 hires in August 2025, up 5.4%.
• Voluntary Separations: Voluntary employee departures reached 146,000, a 150% increase.
• Average Hourly Wage: The average hourly wage in the sector was reported at $39.98.
• Aging Workforce: Approximately 41% of current construction workers are expected to retire by 2031.
• Youth Participation: Only 10% of the current construction workforce is under the age of 25.
• Career Interest: Only 7% of potential job seekers are currently considering a career in the construction field.
• Skilled Craft Shortage: Projections indicate a shortage of over two million skilled craft professionals by 2028 if trends continue.
• Foreign-Born Labor: Nearly 10% of construction and extraction workers are foreign-born, highlighting the industry’s sensitivity to immigration policy.

Conclusion 

The report concludes that success in 2026 will be defined by a firm’s ability to remain agile in a volatile market while maintaining a steadfast commitment to innovation. While traditional sectors like office and retail face slow growth, the explosion of mega-projects in data centers and energy provides a path forward for those with the scale or specialized partnerships to compete. Ultimately, firms that fail to institutionalize robust data governance and adopt AI-driven tools risk rising costs, shrinking margins and long-term strategic irrelevance.

You can check out the full report here.