Article
2026 U.S. Construction Outlook
Thursday, January 15, 2026 from Hub International
Tariffs and labor disruptions will test contractor resilience as growth in data centers fuels opportunities. Download Report
Contractors are heading into 2026 facing continued uncertainty from tariffs, supply chain volatility, and labor disruptions, all of which are driving higher costs and tighter margins. At the same time, stabilizing interest rates, private equity investment, and the rapid growth of data center construction are creating new opportunities for firms with adaptable, risk-aware strategies. Workforce shortages, extreme weather, and rising insurance complexity are pushing companies to invest more in safety, benefits, and sophisticated risk management.
What to Expect in 2026
Uncertainty remains high in the construction industry in 2026 as contractors face tariff and supply chain volatility and immigration enforcement pressures an already tight labor market. Areas of opportunity are emerging, however, as data center construction surges and interest rates are projected to decline. Firms that have demonstrated risk maturity and adaptable business plans will find the momentum they need to stay on solid ground. Download Report
Profitability
Cost management strategies become more critical amid material volatility and labor pressures.
While supply chain disruptions, labor shortages and climate-related delays will continue to pressure construction budgets, the biggest source of uncertainty heading into 2026 will be material costs due to tariffs. Costs of materials have already risen 34% since December 2020, and tariffs are expected to further exacerbate price increases.1 All this volatility complicates insurance valuations and project financing that can shift dramatically between bid and completion.
According to the HUB International 2026 Profitability & Resiliency Executive Survey,2 92% of organizational leaders across North America believe that rising costs will impact their profitability, a 6% increase over last year.
To adapt to rising profitability pressures, contractors are “pre-positioning” materials, buying supplies months in advance to avoid future price spikes. While this shifts cash flow and raises working-capital requirements, it also offers protection against sudden cost surges.
Adding to cost pressures is the industry’s chronic labor shortage. Immigration enforcement actions throughout 2025 have resulted in workers avoiding construction sites. One-third of construction firms are reportedly affected, with 45% attributing project delays to worker shortages.3
Still, there are some bright spots. Interest rates, once a major drag on financing, have stabilized and the Federal Reserve is expected to cut rates through the end of 2025 and into 2026.4 This will help restart stalled projects, as lower rates will reopen pipelines for commercial, residential and infrastructure projects. And while homeownership has dropped to its lowest level since 2019, the build-to-rent trend provides builders with a strong revenue source not directly tied to mortgage rates and tax changes.5
Private equity interest in the construction sector is also accelerating, bringing both new capital and heightened expectations around performance, growth by acquisition, risk and compliance. For construction firms, this creates opportunities and challenges, as navigating investor demands often requires expertise. Partnering with an experienced broker who has a strong private equity practice helps bridge the knowledge gap, ensuring contractors receive tailored guidance, risk management strategies and insurance solutions aligned with investor priorities.
92% of organizational leaders across North America believe that rising costs will impact their profitability.2
Another area of momentum is data center construction. Driven by surging AI demand, these large-scale projects are ramping up despite inflation. While they pose unique insurance challenges, brokers with deep expertise in the industry are helping firms design creative risk-sharing solutions.
Construction firms could find some cost relief on their insurance through owner-controlled insurance programs (OCIPs) and other creative project-specific insurance solutions that can also streamline risks.
Vitality
In the face of chronic labor shortages, workforce investments will help mitigate worker issues.
To meet demand in 2026, the industry will need to recruit at least 500,000 workers into construction jobs.6 Demographic changes are making it more difficult to find those workers, with more than 20% of construction workers over 55 years old and less than 3% of young people considering construction as a career path.7
Immigration enforcement has created a new source of strain, with construction sites nationwide experiencing construction work stoppages. In Florida, for example, multiple construction sites were shut down for several days after a raid that resulted in arrests.8 Such challenges can affect productivity and raise liability risks as firms navigate workforce classification, safety and compliance.
Weather-related events are also putting strain on the construction workforce. Construction workers had the highest number of heat-related deaths between 2015 and 2023.9 Protecting workers from heat-related illness by establishing a prevention program needs to be a top priority for construction firms. Several states, including Washington and Arizona, are enacting strict heat-safety rules to mitigate these injuries, and contractors that embrace compliance can see fewer disruptions and gain a stronger reputation as a safety-minded employer.
Protecting workers’ wellbeing is both a responsibility and smart business practice given the construction industry has the highest number of lost days due to injury.10 Incorporating wearable safety devices and wellness programs are other ways construction firms can reduce claims and build trust among employees.
Failing to comply with worker safety requirements can result in significant liability exposure for construction firms from both workers’ compensation claims and third-party “action over” lawsuits.
Companies that invest in early training and health programs can see meaningful financial returns through lower claims and better productivity, as well as build a culture of caring that shows workers they are valued.
The construction industry will need to recruit at least 500,000 workers to meet demand in 2026.6
Providing personalized benefits that support workers’ specific needs, as well as mental health and general wellness initiatives, is another important way to attract and retain employees. HUB’s Workforce Persona Analysis™ helps construction firms identify what benefits employees need and will use.
Workers appreciate these options, according to HUB’s 2025 U.S. Workforce Vitality Gap Index, with 73% of employees agreeing that a comprehensive and personalized benefits program would increase the likelihood they would stay with their current employer. Forty-eight percent indicated they would take advantage of employee wellbeing programs that include extended mental health benefits and gym memberships.
Another innovative approach is offering employees access to retirement resources like HUB FinPath’s financial wellness platform, which can help them reduce financial stress and work towards their retirement goals. Providing these kinds of personalized benefits enhances the overall employee experience, fostering a more engaged and productive workforce.
Download our 2026 Construction Outlook and Insurance Market Rate Report to see what to expect in the coming year. Download Report
Resiliency
To maintain their edge, construction firms will need to pair resilience with foresight.
Extreme weather is emerging as a primary factor for risk management in the construction industry. Record-breaking heat in Phoenix that forced work stoppages — with 113 consecutive days over 100 degrees Fahrenheit11 — exemplifies the new reality. Such events are becoming more common and disruptive to the industry, with extreme weather like heat, wind and severe storms responsible for delays and expanded timelines for up to 60% of construction projects.12
Strategies are now essential for analyzing climate risks and ensuring contractors have appropriate coverage limits. The good news is firms can leverage advanced weather analytics and modeling to identify vulnerable periods in the project lifecycle and adjust schedules accordingly. Insurance brokers can help firms structure coverage that accounts for regional weather patterns and seasonal variations for long-term resilience by utilizing predictive planning, as well.
While traditional insurance remains the cornerstone of risk transfer in construction, climate change-related events are causing businesses to seek alternatives to address coverage gaps. For example, parametric insurance, which gives a payout once a specified weather metric is met, provides construction firms with a strategic supplement for risks that may not otherwise be covered. Firms can bypass lengthy damage assessment processes and receive immediate capital to cover delays and mitigate business disruption.
It’s important for construction firms to realize, however, that parametric coverage is not a standalone replacement for traditional coverage and typically doesn’t satisfy lender insurance requirements. Experienced brokers can help run scenarios to identify where parametric insurance can be beneficial.
With other coverage lines like commercial auto and excess/umbrella liability experiencing rate increases as high as 15% due to ongoing losses in these segments, exploring other ways to mitigate coverage challenges and risks is critically important.
Extreme weather is responsible for delays and expanded timelines for up to 60% of construction projects.12
A broker with deep industry experience can guide construction firms through scenarios where they would need additional coverage for business interruptions due to supply chain issues, tariffs or labor shortages. They can also evaluate areas where better risk management strategies could reduce the possibility of losses and establish an effective enterprise risk management (ERM) strategy. HUB International 2026 Profitability & Resiliency Executive Survey found that only 6% of leaders have risk management strategies that qualify as advanced in maturity, highlighting significant opportunities for organizations to strengthen their approach.
Data Center Projects
Managing exposures will help firms capitalize on opportunities from the data center construction boom.
Fueled by AI, cloud computing and demand for data storage, data center construction has emerged as a key growth engine for the construction industry with investment in new data center projects totaling over $9 billion in 2024.13 Going forward, capacity is expected to more than triple by 2030, with companies investing at least $7 trillion globally in various types of data center infrastructure. About $1 trillion of that investment will go toward the building of these facilities.14
Though they resemble giant warehouses, data centers are anything but simple. These multi-year, phased developments must be able to continuously expand beyond the parameters of the original plan to meet the evolving energy demand. Because these facilities consume electricity on par with small towns, they can often overwhelm local power grids.
Companies are now building their own plants to ensure reliability.15 For example, in mid-2025, Microsoft struck a $16 billion deal to restart the Three Mile Island nuclear reactor in Pennsylvania to power its AI data centers.16 This project underscores how simple warehouse construction can quickly become a complex industrial project that includes data centers and major infrastructure risks.
In addition, the need for skilled labor, electrical systems and physical security presents new challenges, requiring highly specialized trades and design-build expertise, as well as a specialized insurance program.
About $1 trillion of data center investment will go towards building these facilities.14
The insurance markets are racing to keep pace and manage exposure. Coverage must be spread across multiple insurance markets, requiring brokers with expertise in both construction and power infrastructure. Beyond builder’s risk insurance, exposures such as cyber liability and equipment breakdown are drawing greater underwriting scrutiny.
Contractors looking to capitalize on the growth potential of this space and ensure a durable pipeline of work need to work with an experienced broker who can establish sophisticated coverage structures and risk management strategies.
Moving Your Organization Forward
HUB construction insurance, risk management and employee benefits specialists can help you develop a tailored strategy to protect the bottom line, support your workforce and build resiliency for 2026. Here are some initial considerations:
Develop a comprehensive risk plan.
Risk management should be a pillar of your organization’s culture. By identifying exposures and developing response plans in case of any type of incident, you will be set up for success. A comprehensive risk plan should also include proactive claims management and mitigation protocols to ensure proper procedures are in place before a loss occurs, helping to minimize both losses and expenses. Your broker should understand how to approach risk and find coverage gaps that could disrupt your daily operations.
Create a personalized benefits strategy.
To compete for skilled labor, personalized benefits based on HUB Workforce Persona Analysis and data analytics can help your company differentiate itself from the competition. Creating a quality employee experience (QEX) boosts engagement, improves recruitment and retention and promotes worker wellbeing.
Remain focused on workplace safety.
Safety should already be the focal point of your operation. An influx of new and less-experienced workers can increase injury risks, so working with a risk professional to review your safety program at least annually and address any issues is critical.
Be transparent with your broker.
Communicate regularly with your broker and let them know about changes to the business to eliminate surprises at renewal. Report all claims — even incidents that could potentially lead to a future claim — to your broker as soon as they occur so they can respond quickly and help mitigate potential losses. Review exposures and insurance needs at least 90 days prior to policy renewal so your broker can find the optimal coverages for your organization.