If you’re in commercial construction and your pipeline’s looking thinner than usual, you’re not alone.
Between material hikes, labor pressure, and sky-high borrowing costs, projects are stalling. GCs, MEP firms, and service crews are feeling it from every angle. Here’s what’s going on and what you should be watching.
Interest Rates Are the Real Job Killers
“This is the key issue I think for many contractors going forward: interest rates,” said Anirban Basu, chief economist at ABC.
Borrowing is expensive, and it’s killing momentum. Contractors who aren’t riding the data center wave are watching their project leads dry up.
Even if rates start to ease, it’ll take time for that relief to reach the jobsite. Basu expects real growth to return around late 2026 or 2027. Until then, it’s about staying lean, keeping your pipeline tight, and watching every dollar.
Data Centers: Still Going Strong for Now
If you're in the data center game, you’re likely looking at a solid 12-month backlog. That kind of runway is tough to beat right now. It’s one of the few sectors still running hot, thanks to heavy investment in AI infrastructure.
Outside that niche, backlogs are closer to 8 months on average. Not bad, but it’s something to keep an eye on.
Basu noted the long-term ROI on all this AI buildout isn’t a sure thing. “It’s not obvious to me that these companies investing these tens of billions of dollars on AI infrastructure are going to receive much of a rate of return.”
For now, the work is steady. Just keep in mind that this boom isn’t indefinite, and it’s worth planning ahead in case demand starts to taper off.
Crowded Markets Are Slowing the Flow
In cities like Nashville, Tampa, Austin, and Denver, contractors are seeing tighter margins and fewer new starts as these markets hit a saturation point.
“Projects are no longer penciling out from a pro forma perspective,” said Basu.
The usual factors are in play:
- Delivery costs are higher
- Construction costs keep climbing
- Job creation has cooled
Lenders are more cautious now. When the numbers fall short up front, securing funding gets tougher. Deals are still out there, but winning them takes sharper bids and stronger forecasting.
Public Work Still Moving, But Keep Watch
Public infrastructure jobs have helped many contractors stay busy this past year. That’s still the case, but it’s smart to watch what’s ahead.
Funding under the Infrastructure Investment and Jobs Act winds down in September 2026, and some states and municipalities are already tightening their budgets. “Financing for public projects has sort of dried up recently,” Basu said, pointing to fewer RFPs in some regions.
Now’s the time to solidify relationships, stay plugged into upcoming bid opportunities, and lock in work while funding’s still available.
Now’s the Time to Tighten the Screws
Markets are shifting, and this is the time to refocus. Tighten up operations, dial in the numbers, and protect profits before small inefficiencies turn into big losses. Stay focused, and put your energy where it counts:
- Track your backlog closely. Your margins depend on knowing what work is locked in and for how long.
- Audit your pipeline strategy. If a job fails to pencil out, skip it. Focus on quality over volume.
- Balance your revenue mix. Service and preventative maintenance work bring stability when new builds slow down.
- Tie procurement to submittals. Only order materials once they’re approved to avoid delays and rework.
- Stay on top of job costing. Real-time visibility on expenses, labor, and materials helps you protect profits, especially on tight bids.
- Streamline quoting and invoicing. The faster you bill, the faster you get paid. Cut the lag between work done and money in.
