Over the past year, I’ve had countless conversations with contractors, developers, lenders, and property owners about what’s next for the construction industry. While many firms continue to benefit from healthy project pipelines, the data suggests we’re entering a period where discipline, selectivity, and strategic planning will become increasingly important.
These were some of the key themes I shared during last month’s event, Building Forward: 2026 Construction & Real Estate Outlook. Drawing from industry benchmark data, market research, and economic indicators, here are several trends construction and real estate leaders should be watching as they plan for 2027.
Strong Demand Remains, But Growth Is Becoming More Selective
Construction demand continues to be driven by a handful of high-growth sectors. According to the Associated Builders and Contractors (ABC) Construction Backlog Indicator (CBI) and Construction Confidence Index (CCI), contractors remain optimistic about opportunities in data centers, power infrastructure, manufacturing, healthcare, and transportation-related projects.
At the same time, not all segments are experiencing the same level of growth. Certain commercial property types, including office and retail development, continue to face headwinds due to changing occupier demand and economic uncertainty.
The takeaway? While opportunities remain plentiful, firms can no longer rely on broad industry growth alone. Understanding where demand is moving and aligning business development efforts accordingly will be critical.
Source: ABC Construction Backlog Indicator (CBI) and Construction Confidence Index (CCI).
Financial Performance Varies Significantly Across the Industry
One of the most valuable insights from the 2026 CFMA Construction Financial Benchmarker is that there is no single formula for a successful construction company. Financial performance varies significantly based on company size, geography, specialty, and project delivery model.
The benchmark data highlights several important trends:
- Profitability often declines as contractors grow larger and become more operationally complex.
- Larger contractors typically carry higher leverage and maintain tighter liquidity positions.
- Specialty trade contractors frequently outperform general contractors in profitability and return on assets.
- Firms that effectively manage working capital, backlog, and risk tend to outperform their peers over time.
For construction leaders, benchmarking against similar companies is often far more valuable than comparing results to national averages.
Source: 2026 CFMA Construction Financial Benchmarker.
The Backlog Story Is More Complicated Than It Appears
Backlog remains one of the industry’s most important indicators because it provides a glimpse into future revenue opportunities.
According to the latest ABC Construction Backlog Indicator, overall backlog levels have remained relatively stable. However, headline numbers tell only part of the story. Contractor experiences vary significantly by market, company size, and specialty.
While many firms report growing backlogs and healthy pipelines, others have seen project delays, increased competition, or shrinking opportunities. Smaller contractors in some markets have experienced stronger gains, while larger firms in certain sectors have reported more modest growth.
These disparities reinforce the importance of monitoring backlog trends within your specific niche rather than relying solely on national industry averages.
Source: ABC Construction Backlog Indicator (CBI).
What Leading Indicators Tell Us About 2027
While current construction spending remains relatively healthy, several leading indicators suggest firms should begin planning for a potentially more challenging environment in 2027.
The AIA/Deltek Architecture Billings Index (ABI) has remained below growth territory for an extended period. Because architectural billings typically lead nonresidential construction activity by nine to twelve months, prolonged softness can indicate fewer private-sector projects entering construction pipelines in the future.
At the same time, the Dodge Momentum Index (DMI) continues to show strength in select categories. However, much of that growth has been driven by a relatively small number of sectors, particularly data center development. Outside of those areas, project planning activity has been considerably less robust.
For contractors, these indicators reinforce the importance of:
- Building stronger client relationships now
- Investing strategically in business development and preconstruction efforts
- Remaining disciplined in project pursuits
- Focusing on margin protection rather than volume alone
Firms that prepare today will be better positioned to navigate changes in market demand tomorrow.
Sources: AIA/Deltek Architecture Billings Index (ABI); Dodge Momentum Index (DMI).
Commercial Real Estate Performance Depends on Asset Type
The commercial real estate market continues to present a mixed picture.
Industrial properties remain one of the strongest-performing asset classes, supported by manufacturing investment, logistics demand, and continued supply chain modernization. Despite substantial new inventory entering the market in recent years, many industrial markets continue to demonstrate healthy absorption and long-term fundamentals.
The office sector tells a different story. While some markets are showing signs of stabilization, demand remains concentrated in newer, high-quality buildings. Many older assets continue to face elevated vacancy levels, prompting investors and owners to explore renovation, repositioning, and adaptive reuse opportunities.
As a result, commercial real estate performance is increasingly determined by asset quality and location rather than broad market trends.
Sources: CoStar Market Analytics; CBRE Market Reports.
Multifamily May Be Entering a New Phase
After several years of record apartment deliveries, multifamily fundamentals are beginning to stabilize.
New supply levels are moderating in many markets; vacancy rates have remained manageable, and rent growth is gradually improving. At the same time, developers are beginning to re-enter the market as construction starts to show signs of recovery.
Across many Midwest and Southeast markets, easing supply pressures may create favorable conditions for future development opportunities.
For developers and investors, this could represent the early stages of the next multifamily growth cycle.
Sources: CoStar Market Analytics; RealPage Market Analytics.
Key Takeaways for Construction and Real Estate Leaders
As firms begin planning for 2027, three themes stand out:
1. Benchmark Against the Right Peers
Performance metrics vary significantly based on company size, geography, and specialty. Meaningful benchmarking starts with comparing your business to firms that truly resemble yours.
2. Recognize That Growth Is Concentrated
Data centers, power infrastructure, healthcare, manufacturing, and select institutional sectors continue to drive a significant share of construction activity. Identifying where demand is growing can help organizations allocate resources more effectively.
3. Plan Proactively
While opportunities remain abundant, leading indicators suggest competition could intensify in the years ahead. Firms that invest in client relationships, pursue projects strategically, and maintain financial discipline will be best positioned for long-term success.
Download the Full Presentation
Want a deeper dive into the data?
Download Andrew Donohoe’s full Building Forward: 2026 Construction & Real Estate Outlook presentation for additional benchmarking insights, market forecasts, and sector-specific analysis.
