As the construction industry looks toward 2027, the outlook is neither a traditional boom nor a broad downturn. Instead, the market is following what economists describe as a K-shaped path—some sectors are expanding rapidly while others remain flat or continue to contract.
Total U.S. construction spending is expected to remain above $2.2 trillion, demonstrating the industry’s enormous scale. Yet that headline number does not tell the full story. Opportunities will differ dramatically depending on what is being built, where it is located and how the project is financed.
The American Institute of Architects’ July 2026 Consensus Construction Forecast projects that nonresidential building spending will increase approximately 3.0% in 2027. That represents an improvement from the weaker conditions experienced in 2026, but the growth is concentrated in only a handful of markets.
For owners and AEC firms, the message is clear: The market may grow in 2027, but it will not lift every sector equally.
The Sectors Driving the Market
Data Centers and AI Infrastructure: The Dominant Growth Engine
Few sectors illustrate the upper arm of the “K” more clearly than data centers.
The AIA forecasts data center construction spending will grow another 25% in 2027, following an estimated 33% increase in 2026. By 2027, data centers could represent approximately 8% of all nonresidential building spending.
This activity is influencing the broader commercial forecast, which is projected to grow 5.8% in 2027. However, without data centers, commercial construction would grow by only about 1%.
That distinction matters. While the commercial category may appear strong on paper, traditional office, retail and other privately financed projects are not experiencing the same momentum.
Data centers also create opportunities beyond the building itself. They require substantial electrical capacity, cooling infrastructure, backup power, telecommunications, security, controls and specialized construction expertise. At the same time, their energy, water and infrastructure demands require early coordination among owners, utilities, design teams, contractors and public agencies.
Healthcare: A Dependable Anchor
Healthcare continues to offer one of the more stable construction pipelines. Spending is forecast to increase approximately 4.4% in 2027, driven by an aging population and continued demand for hospitals, outpatient facilities, specialized treatment centers, senior care environments and medical renovations.
For the St. Louis region—with its significant healthcare, research and institutional presence—this sector should remain an important source of opportunity. Firms with experience navigating occupied facilities, infection-control requirements, complex building systems and phased construction may be especially well positioned.
Hospitality and Recreation: Selective Strength
Hotel construction is projected to grow approximately 5.2% in 2027, while amusement and recreation construction is forecast to increase about 3.0%.
These markets are still selective, but investment in sports facilities, entertainment venues, performance spaces, hotels and visitor experiences could generate opportunities in communities seeking economic development and tourism growth.
Education and Retail: Modest Movement
Education construction is forecast to grow just 0.9% in 2027, while retail and other commercial construction may increase approximately 2.7%.
These markets are not disappearing, but much of the work may center on modernization, renovation, adaptive reuse and improvements to existing facilities rather than large waves of new construction.
Manufacturing: Stabilizing After a Historic Surge
Manufacturing construction reached extraordinary levels following major investments in semiconductor, battery and advanced-manufacturing facilities. That expansion is now cooling.
The AIA forecasts manufacturing construction spending will decline 0.6% in 2027, following a much sharper contraction in 2026. This should be viewed as a normalization after an unprecedented investment cycle—not the disappearance of industrial work.
Opportunities may increasingly shift toward facility improvements, utility upgrades, automation, process changes and expansions within existing operations.
Traditional Office Construction: Continued Pressure
Traditional office construction remains one of the weakest sectors. Spending is projected to decline another 4.5% in 2027as organizations continue evaluating space needs, hybrid work arrangements and existing vacancies.
For design and construction firms, the greater opportunity may be in repositioning older buildings, consolidating workplaces, modernizing amenities and converting underused properties to new purposes.
Housing: A Divided Outlook
Housing is experiencing its own version of a K-shaped market.
Some forecasts anticipate a gradual improvement in single-family construction as mortgage rates ease and pent-up demand begins to return. Multifamily construction, however, may remain soft as the market absorbs the large number of units delivered during the recent development cycle.
Affordability, financing costs, insurance, land availability and local population growth will continue to determine which markets move forward. Housing forecasts also vary significantly, making local market intelligence especially important when evaluating development opportunities.
What the Midwest Forecast Means for St. Louis
Nationally, the Southern United States continues to lead in construction volume. ConstructConnect projects Southern nonresidential starts will reach approximately $310.6 billion in 2027, supported by infrastructure, population growth, technology investment and healthcare construction.
The Midwest is following a different path. After a period of significant megaproject activity, regional nonresidential starts are expected to moderate and then stabilize at approximately $131.5 billion in 2027.
For St. Louis, this reinforces the importance of evaluating the regional market on its own merits. Healthcare, advanced manufacturing, infrastructure, institutional investment, energy, research, logistics and redevelopment can create meaningful local opportunities even when broader regional forecasts appear modest.
The firms best positioned for 2027 may not be those waiting for every market to improve. They will be the organizations closely tracking where capital is actually moving—and aligning their expertise accordingly.
Three Pressures That Could Affect Project Margins
- The Workforce Gap
Labor availability will remain one of the industry’s most persistent challenges. Associated Builders and Contractors estimates that construction will need to attract approximately 456,000 additional workers in 2027 to meet expected demand.
The challenge extends beyond field labor. The industry also needs project managers, estimators, superintendents, engineers, architects, schedulers, safety professionals and experienced leaders.
Workforce development cannot be treated solely as a recruiting problem. Retention, training, mentoring, career advancement and knowledge transfer will all be necessary as experienced professionals retire and competition for talent intensifies.
- Financing and Project Scrutiny
Interest rates and tighter lending conditions will continue placing pressure on privately financed and discretionary projects.
Owners are likely to scrutinize project scope, risk, phasing and return on investment more carefully. Some projects will move forward in smaller stages, while others may be redesigned, postponed or canceled.
Early cost intelligence and candid communication among owners, designers and contractors will become increasingly valuable. Waiting until documents are substantially complete to confront affordability could lead to costly redesign and lost time.
- Technology and Delivery Innovation
Labor constraints, compressed schedules and margin pressure will accelerate the use of prefabrication, modular construction, automation, digital coordination and AI-assisted project tools.
Technology alone will not solve the industry’s productivity challenges. The real advantage will come from combining technology with better processes, stronger collaboration and employees who know how to use the tools effectively.
Organizations should evaluate technology based on measurable outcomes:
- Does it reduce rework?
- Does it improve estimating or scheduling?
- Does it strengthen safety?
- Does it help teams make decisions earlier?
- Does it reduce administrative burden?
- Does it improve communication among owners, designers and builders?
Preparing for an Uneven 2027
A K-shaped market rewards focus and adaptability. Owners and AEC firms should consider several priorities as they prepare for the coming year:
- Track opportunities by sector rather than relying on broad industry totals.
- Strengthen relationships in healthcare, infrastructure, technology and institutional markets.
- Discuss budgets, financing and escalation risks earlier.
- Invest in workforce retention and leadership development.
- Expand capabilities in renovation, modernization and adaptive reuse.
- Build strategic partnerships before major pursuits are announced.
- Use technology where it produces a clear operational or financial benefit.
- Develop contingency plans for material, labor and financing volatility.
The Bottom Line
The 2027 construction market is expected to improve—but not evenly.
Data centers, healthcare and select public or institutional investments will remain important sources of growth. Traditional office construction and other interest-rate-sensitive markets may continue to struggle. Manufacturing will settle into a more sustainable rhythm following several years of extraordinary investment.
For the St. Louis AEC community, success will depend on recognizing these differences early. The organizations that remain informed, strengthen their partnerships and adapt their services to changing demand will be in the strongest position to capture opportunity.
The market is not simply rising or falling. It is separating—and understanding where those lines are forming will be one of the most important strategic advantages of 2027.
Enjoyed this? Join us in December as we hear directly from industry leaders. In January, we will host Charles Gascon for our update from the Federal Reserve St. Louis.
Sources: American Institute of Architects, July 2026 Consensus Construction Forecast; Associated Builders and Contractors, 2026 Workforce Shortage Model; ConstructConnect regional construction forecasts; FMI 2026 North American Engineering and Construction Outlook.
