- Construction backlog dipped to an average of 8 months in January, a 4-year low, with a marginal recovery in February.
- Tariffs and military conflict have driven up material prices, particularly in copper, iron, and steel.
- Construction starts fell across most sectors, offset only by large nonbuilding projects.
- Data center projects show much longer backlog periods than other asset types.
Construction Backlog Near Lows
Bisnow reports that construction backlog—a key gauge of industry workload—has fallen to levels not seen since 2022, according to new data from Associated Builders and Contractors. The Construction Backlog Indicator averaged just 8 months in January, with a small uptick to 8.1 months in February. This marks the lowest point in four years, reflecting a nationwide slowdown in new construction activity.
Regional and Sector Divergence
The Northeast, South, and West regions all posted backlogs below last year’s results, while the Middle States region experienced a rare boost—backlog there jumped by one full month in February. This uptick was supported by broader population and economic gains across Midwest states. However, outside the Middle States, most of the US continued to experience slowing development pipelines.
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Material Price Pressures
Material prices for nonresidential construction rose at a 7.1% annualized rate in January. Tariffs on copper, iron, and steel further pressured costs, a trend likely to worsen with global conflict and elevated oil prices. Contractors report that rapidly rising input costs could undermine profit margins and hiring expectations in coming quarters, particularly if military conflict in Iran continues to disrupt markets. At the same time, labor demand in construction has cooled, with job openings dropping sharply in recent months even as many firms say they still struggle to fill skilled positions.
Construction Starts and Pipeline Trends
National construction starts declined in January: nonresidential starts dropped 15.4% and residential starts fell 6.4%. The nonbuilding sector was an exception, buoyed by three major projects worth nearly $20B, which accounted for almost half of January’s construction growth. Data center developments bucked the trend, with contractors in this sector reporting a backlog of 11.2 months compared to 7.6 months for other projects. Ongoing market uncertainty could further suppress future construction backlog if current conditions persist.
