Data Center Boom Continues But Cost Pressures Mount in Q2 2026
According to Engineering News-Record, construction inflation is intensifying heading into the second half of 2026, driven by tariff-related price hikes and an energy spike tied to the ongoing conflict in the Persian Gulf. Michael Guckes, chief economist at ConstructConnect, said tariffs have already placed a significant floor under construction inflation, which has been rising steadily, and that materials prices are expected to move higher still as Middle East tensions persist. Total construction starts are up 5% through April, led by utilities and data center work, while residential starts have fallen 4%.
What It Means for Subcontractors
- Fixed-price subcontracts signed now carry significant escalation risk, as materials costs are not yet fully reflecting the latest energy price jump, according to ConstructConnect’s chief economist.
- Data center and utilities work remains the strongest source of new contracts, but subs should price bids conservatively and push for escalation clauses where possible.
- Multifamily is a growing bright spot with starts up 8% through April, offering pipeline opportunities as single-family work contracts under mortgage rate pressure.
