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While these trends present significant challenges, they also create opportunities for organizations that can connect their data, workflows, and people to improve operational performance. Understanding the forces driving this change can help leaders make better decisions, strengthen resilience, and build more competitive businesses for the future.
The trends themselves are not new. What is changing is how closely they now intersect. Economic pressures are accelerating the need for greater productivity, workforce shortages are increasing demand for automation, and the growth of AI is placing renewed importance on connected, accurate, and well-governed data.
Supply Chain and Economic Challenges are Increasing Delivery Risks
The construction sector and wider AEC industry continue to operate in an uncertain economic environment, with geopolitical instability, rising material costs, trade tariffs, and changing government policies all influencing industry growth.
The impact of these pressures has been evident in the US, where spending in the construction industry was nearly 3% lower in July 2025 ($2.14 billion) than in the previous year ($2.2 billion). When broken down by subsector, commercial construction fell by 8.2% over this period, with manufacturing construction falling by 7%.
While the pace of the spending decline has eased, economic pressures continue to limit the construction industry, with total US spending in May 2026 1.5% lower than in the previous year.
Despite the wider decline in industry spending, commercial planning activity was 12.3% greater in February 2026 than a year earlier, while institutional planning activity increased by 34%.
Although planning does not guarantee future activity, this suggests confidence remains strong in parts of the market despite ongoing construction industry trends and economic uncertainty.
While some trends in the construction industry point toward recovery, ongoing global challenges mean AEC organizations must continue balancing short-term resilience with strategic long-term investment. Those able to improve visibility across projects, resources, and business operations will be better positioned to respond to changing market conditions and make more confident investment decisions.
Labor and Skills Shortages Are Reshaping the AEC Workforce
Labor shortages are placing significant pressure on the construction industry, limiting productivity and affecting project delivery.
The scale of the workforce shortage is clear, with Deloitte estimating that the industry will require 499,000 new workers in 2026, a rise of 60,000 from 2025. Demographics present an additional concern, with 41% of the current workforce expected to retire by 2031, while only 10% of current workers are aged under 25.
The consequences of labor shortages have a knock-on effect, with analysis predicting that the industry could lose $124 billion in construction output from unfulfilled positions if the labor gap is not addressed.
While these figures highlight the scale of the workforce challenge, they are also changing how construction and AEC organizations attract, develop, and support their people to improve productivity.
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PwC reports that nearly half of engineering and construction firms already have reskilling programs in place, with most others planning to introduce them within a year.
Digital capability is becoming an essential part of addressing labor and skills shortages. As of 2026, only 16% of construction companies have reached an advanced level of digital capability, with workforce skills identified as the weakest area. As organizations continue investing in digital technologies, equal emphasis must be placed on building the skills and confidence people need to adopt and use them effectively.
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The role of technology is to make work simpler, easier to maintain, and easier to improve - helping people achieve the outcomes they're aiming for, rather than creating more complexity
Addressing these challenges will require a multifaceted approach that combines recruitment, practical training, digital upskilling, and technologies that enable existing teams to work more efficiently, make better-informed decisions, and maximize the value of their expertise.
Industrialized Construction is Reshaping Project Delivery
Construction remains one of the world's largest industries, with McKinsey reporting the sector accounts for around 13% of global GDP when real estate, infrastructure, and industrial structures are included. Given its scale, even modest improvements in productivity and delivery efficiency have the potential to create significant economic value.
As project complexity increases alongside labor challenges, rising costs, and tighter deadlines, construction businesses are looking for more efficient and predictable ways to deliver projects. This is driving greater adoption of industrialized construction, with more work moving into controlled factory environments where quality, productivity, and repeatability can be better managed.
The benefits are becoming increasingly evident. Modular delivery can reduce data center construction times by up to 50% compared with traditional methods. Meanwhile, the US modular construction market for offices and data centers is expected to grow by more than 7% annually through 2029, highlighting continued investment and demand.
As adoption continues to grow, the full value of industrialized construction will increasingly depend on how well factory production, design, project delivery, and site operations are connected through integrated digital workflows. Organizations that can coordinate information seamlessly across these environments will be better positioned to improve efficiency, reduce risk, and deliver more predictable project outcomes.
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Connected Data, AI and Intelligent Workflows
Connected data, AI, and intelligent workflows are becoming defining capabilities for modern AEC organizations. Rather than investing in technology for its own sake, leading firms are using connected information and automation to strengthen collaboration, speed decision-making, and increase productivity across the project lifecycle. As profit margins remain tight, the ability to turn data into operational insight is becoming an increasingly important competitive advantage.
This shift is reflected in future investment plans, with 56% of engineering and construction executives saying they planned to increase their investment in AI and automation over the next three years in 2025. A further 42% claimed they planned on increasing their investment in robotics over the same period.
The practical benefits are already becoming evident. Industry research shows that combining building information modeling (BIM), digital twins, and 3D printing can reduce project timelines by up to 20%. Construction layout robots are also demonstrating significant productivity gains, reducing field layout time by as much as 80%, from five days to just one.
As AI and intelligent technologies continue to evolve, competitive advantage will come not from adopting more tools, but from connecting data, systems, and workflows across the business. Organizations with trusted data and integrated workflows will be better positioned to automate routine tasks, improve decision-making, and respond more quickly to changing project demands.
While AI presents significant opportunities, realizing its full potential requires complete, accurate, and well-governed data. As ARKANCE Chief Technology Officer Iain Cosgrove explains:
AI is only as good as the data behind it. Before organizations can realize the full value of AI, they need complete, accurate, well-governed data. That's the foundation that allows automation, analytics, and AI to deliver meaningful business outcomes.
Iain believes the same principle applies more broadly to digital transformation.
"Digital transformation isn't a one-time initiative-it's an ongoing process of improving how the business works, one well-defined outcome at a time."
AI Infrastructure is Creating New Construction Demand
AI is not only changing how AEC organizations work - it is also creating demand for entirely new types of infrastructure projects. Power demand from US data centers is expected to reach 176 GW by 2035, more than five times the level recorded in 2024.
Meeting this demand will require significant investment in data centers, power generation and distribution, cooling systems, and supporting infrastructure. For architects, engineers, and construction teams, this means delivering increasingly complex projects at greater speed and scale while coordinating multiple disciplines across the project lifecycle.
For AEC organizations, this growth presents a significant opportunity. Realizing that opportunity, however, will depend on having the skills, resources, and connected digital workflows needed to plan, design, and deliver increasingly complex infrastructure efficiently and predictably.
A Sustainable Future for AEC
Sustainability continues to shape investment and decision-making across the AEC industry. As organizations work to reduce waste, improve resource efficiency, and meet evolving environmental expectations, digital technologies provide greater visibility into how projects are designed, delivered, and operated.
Industrialized construction is also contributing to this transition, with research showing that factory-controlled modular construction can reduce carbon emissions by up to 34%.
Connected digital workflows also help organizations make better decisions about resource and equipment utilization. A 2025 study found that BIM-enabled design achieved energy savings of between 20% and 32% compared with conventional approaches, while reducing carbon emissions by 18% to 30%.
As sustainability becomes increasingly embedded in project delivery, the ability to connect data across projects, assets, and business operations will help organizations better measure environmental performance, optimize resource use, and make more informed decisions throughout the project lifecycle.
Turning Industry Challenges into Operational Advantage
The key trends shaping construction and the wider AEC industry in 2026 are closely interconnected. Economic uncertainty, labor shortages, industrialized construction, AI, and sustainability are collectively reshaping how organizations plan, deliver, and operate projects.
As these challenges evolve, the organizations best positioned for long-term success will be those that connect their data, processes, and people to improve operational performance - not simply adopt new technologies. The greatest value comes from building connected workflows that strengthen decision-making, increase resilience, and help teams respond more effectively to changing business demands.
ARKANCE helps AEC organizations turn digital complexity into operational advantage. Through practical industry expertise, enduring local relationships, and the resources of a global network, we work alongside customers to connect workflows, improve operational maturity, and deliver measurable business outcomes that create lasting value across the business.