Power, Tariffs, and Labor: Key Pressures on Construction Costs

Power constraints, tariff-driven material costs, and labor shortages are creating new challenges for contractors and owners across U.S. nonresidential construction.

What Happened
MOCA Systems Inc. (MSI) has released its Q3 2026 edition of Today’s Construction Economy, highlighting three major pressures impacting the U.S. nonresidential construction market: power availability, material costs, and labor shortages. Notably, electric-grid constraints are delaying data center projects, with data center construction spending up about 23% year over year. However, grid interconnection delays are increasingly affecting project timelines. Simultaneously, manufacturing construction has declined by approximately 22% year over year as spending related to the CHIPS Act and Infrastructure Investment and Jobs Act fades.

Material costs, driven by tariffs, remain a significant concern. Contractors have yet to fully pass higher tariff-related costs into bids, creating a gap between rising input costs and project pricing. This pressure is expected to become more apparent as existing contracts are completed and new projects are bid. Labor shortages continue to challenge the industry despite a moderating job market. Construction unemployment reached 4.1% in May, up from 3.5% a year earlier, with the industry projected to need about 349,000 additional workers in 2026. Immigration enforcement is also cited as a factor affecting labor availability in some regions.

What This Means for Your Business
For owners and contractors, the findings suggest that power access, material pricing, and workforce availability could have a greater effect on project costs and schedules than some of the industry's more prominent technology and reshoring trends. As contractors navigate these pressures, adjustments in procurement strategies may be necessary to accommodate the rising material costs and to secure reliable labor resources. Additionally, companies should consider the implications of grid-related delays on project timelines, particularly for data center construction, and potentially seek alternative solutions or partners to mitigate these risks. The gap between input costs and project pricing highlights the need for strategic bidding and cost management practices to maintain profitability.

What US Operators Should Watch
Decision-makers should closely monitor federal policies affecting tariffs and immigration, as these could impact material costs and labor availability. Additionally, tracking developments in grid infrastructure improvements will be critical for those involved in data center projects. As the industry braces for these challenges, staying informed about federal funding opportunities and regulatory changes could provide avenues for strategic advantage. Operators should also keep an eye on labor market trends and potential policy shifts that could influence workforce availability.

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Source: https://www.forconstructionpros.com/business/industry-trends/article/22973112/msi-data-report-identifies-key-forces-shaping-construction-costs-and-schedules. Read the original story ->

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