Construction Outlook 2026: Key Risks and Growth Opportunities for Business Owners

Construction Outlook 2026: Key Risks and Growth Opportunities for Business Owners

by | Accounting News, Construction, Industry - Construction, News, Newsletter

The construction industry enters 2026 facing both persistent headwinds and emerging opportunities. Rising material costs, ongoing labor shortages, and policy uncertainty continue to challenge business owners. But at the same time, there’s an undercurrent of guarded optimism as the industry enters 2026. Here’s what construction companies need to know to plan for success in the year ahead.

Labor Shortages and Wage Pressure Continue

The labor shortage in construction is unlikely to go away in 2026. With many experienced workers retiring and fewer younger, skilled workers entering the industry, the competition remains strong for skilled talent. This is driving upward wage pressure.

Contractors should focus on workforce training programs to foster internal talent, employee retention efforts that go beyond pay, and productivity improvements through better scheduling and technology.

Material Costs and Tariff Uncertainty

Trade policy is a wild card. Tariffs on key materials like copper, steel, and plastics are still in play and could increase costs even more. Given the current uncertain roadmap for trade deals, pricing volatility could persist throughout the year.

That said, federal tax incentives could boost domestic production and help ease pressure on supply chains. In the short term, though, business owners should expect price swings.

Smart moves include:

  • Strengthening relationships with suppliers and securing long-term supply agreements
  • Focusing on long-term financial planning, including building in contingency budgets
  • Improving your forecasting and cash flow planning

Economic Signals: Mixed but Stabilizing

Construction activity slowed in 2025, largely due to high interest rates and uncertainty surrounding federal policy. Commercial construction was especially uneven. But 2026 may bring some recovery, driven by:

  • Better financing conditions if interest rates continue to ease
  • Clarity on federal policies that could revive delayed projects
  • New tax credits that spark demand for specific projects

Still, recovery will likely be uneven. Public infrastructure has remained a bright spot thanks to the Infrastructure and Jobs Act of 2021, but that funding is set to expire in October 2026. Without additional supportive legislation, public-sector activity could slow significantly after 2026.

How to Prepare for 2026

To stay competitive, construction businesses should:

  • Invest in workforce training and prioritize employee retention. Focus on your current team with on-the-job training, mentorship, and safety certifications. Investing in your crew reduces project delays and helps retain your best workers.
  • Tighten cost estimation and build in price flexibility. Update your cost estimation strategies to account for fluctuating material costs and wage increases. Include contingencies in your bids to protect margins.
  • Monitor trade and tax policy. Keep an eye on tariffs and federal tax incentives that may impact project pipelines.
  • Improve cybersecurity. If needed, upgrade your systems to protect sensitive project data and employee records. Use multi-factor authentication and encrypted file storage.

For construction business owners, 2026 is likely to be a balancing act between opportunity and caution. But when you focus on resiliency and efficiency, you’ll be able to handle the swings in demand and capitalize on opportunities.

How Tariffs Are Affecting Construction Costs

How Tariffs Are Affecting Construction Costs

by | Accounting News, Industry - Construction, News, Newsletter, Small Business

The Trump administration enacted new tariffs on lumber and kitchen cabinets, adding pressure to construction budgets. The tariffs apply a 10% duty on softwood lumber and a 25% levy on imported kitchen cabinets. By 2026, the cabinet tariff is set to double to 50%. As a result, we could be looking at higher construction costs, project delays, and a housing market ripple effect that could ultimately hit renters and homebuyers. Read on as we discuss the impact of these tariffs on the construction industry and the responsive steps to take now.

Why These Tariffs Matter

The construction industry relies heavily on imported materials. Lumber, cabinets, steel, and other staple building materials often come from global suppliers because domestic supplies fall short of meeting demand.

Canada is the top supplier of softwood lumber, making up about 40% of lumber imports. This is followed by China, Brazil, Mexico, and Germany. Tariffs on these imports raise prices for consumers.

Unfortunately, there is no quick fix. With a limited domestic production base, builders can’t just “buy American” and move on. That means higher costs get passed along the chain, from developers to consumers.

The Impact on Builders and Developers

When it comes to construction projects, a 10-25% spike in material costs can throw off budgets, delay construction timelines, or force design changes. Some of the hardest-hit sectors include multi-family housing, affordable housing projects, and areas rebuilding after natural disasters. For example, Los Angeles developers were already paying a premium for lumber after the wildfire damage. Now, added tariffs could stall rebuilding efforts and new construction.

An Industry in Flux

Developers are looking for new suppliers in countries not affected by tariffs, and they’re exploring alternatives such as engineered wood like LVP, laminate cabinets, and open shelving. But making these changes when projects are already underway can lead to longer lead times and further delays.

And while tariffs are enacted to protect U.S. industries, there is no quick way to ramp up domestic production of lumber and cabinetry. So builders are caught in the middle.

What Construction Firms Can Do

Here’s how construction businesses can respond to these tariffs:

  • Review your material suppliers. If you rely heavily on imported lumber or cabinets, check lead times.
  • Start having conversations with clients about possible price fluctuations.
  • Make sure new bids for projects account for potential increases.
  • With new projects moving forward, build in flexibility for longer timelines.
  • Explore U.S.-made materials or products from countries not affected by tariffs.

Tariffs could significantly impact the construction landscape as builders and developers face higher costs, tighter timelines, and growing uncertainty. For now, and especially next year when tariffs on lumber rise further, the cost is likely to trickle down to consumers and local economies. The construction industry will need to adapt quickly, or fall behind.