March 9, 2026

The below transcript is a translation of the podcast audio that has been machine generated by Notta.

Hi everyone, this is Taylor St. Germain with ITR Economics. Thanks so much for joining me on this episode of Trends Talk. We at ITR are your apolitical and unbiased source of economic intelligence. And today I wanted to talk through commercial construction. The last time we talked commercial construction was back in November of 2025. Given it’s been about a quarter since then, I felt that it was time for us to provide a little update here.

So first wanted to highlight that commercial construction has essentially surpassed the low point, which is good news and bad news. Of course, I’m not saying commercial construction is positive yet, but I’m saying at least it’s getting less negative. So I guess that’s the good news spin that I’ll put on the dataset. But when we refer to commercial construction, we’re primarily looking at a data series from the Census Bureau, it’s US Private Nonresidential Construction. So anything that’s not residential construction gets lumped into this dataset. The year-over-year growth rate for this dataset is at minus 3.1%. Again, that is a mild improvement from the minus 3.3% that we saw just a few months ago. So we have surpassed the cyclical low. Our leading indicators suggest that we have another two quarters of less negative activity. So that growth rate building momentum, but by the time we move into the second half of this year, we’re expecting to see positive trends out of the commercial construction space.

There are a number of leading indicators that we track that are pointing to this stronger second half growth that I just highlighted. The first indicator that I like to share comes from the Association of Builders and Contractors, it’s the construction backlog. And so it’s really an indicator that just shows us over time are backlogs growing or are backlogs declining. Well, the growth rate for this indicator is at a positive 1.4%. And that is a 7 month leading indicator to overall commercial construction activity. So really all I want you to take away from this explanation I’m sharing with you is that we see commercial contractors backlogs actually building at this point in time, which is a great about two quarter leading indicator to suggest we should expect some growth in the commercial sector overall. Another indicator we track very closely is the Green Street All Commercial Property Price Index. That is a 13 month leading indicator to commercial construction activity, and that price indicator is up 3.5%. So we’re seeing commercial property prices actually growing in price. And that is a great leading indicator to suggest we’re in for this growth in the second half of this year. So we’ve got growing backlogs, we have growing prices and those are great leading indicators to suggest there’s better times ahead for commercial construction.

Now, as always, I do want to highlight there’s certain areas of commercial construction that are performing better than others. For example, US Total Hospital Construction, that’s up 4.2% as we’re sitting here today. So while the overall industry might be down, hospital construction is positive. We also see US Total Education Construction is up almost 1%. So there are some of these commercial construction verticals that are giving us positive numbers as we sit here this year, but there are some other negatives out there. For example, multi-tenant retail construction still down 12.2% compared to the year prior, office construction still down 14%, warehouse construction down 15%. So depending on which commercial construction vertical you’re looking at, there’s a very different reality to the situation we’re in.

But as we progress through 2026, we have retail construction turning positive. We have retail construction growing 3.3% in ’26. We have office construction improving, from the minus 14% that it’s at today, to a positive 1.2% by the end of the year, and warehouse from minus 15.5% to a positive 15% by the end of ’26. So you can see a lot of these inflection points developing in the data, which is even for those industries that are quite negative today from a commercial construction standpoint, we expect the majority of them to flip to positive as we move later into this year.

So my message for the commercial contractors out there, for the businesses that support and serve the commercial construction space, folks, there’s growth coming. I know I’m that economist that’s telling you growth is coming, but we see it in the leading indicators. We see it in the data. The reason I highlight this is I don’t want businesses to assume that where we are beginning the year is going to be where we are at the end of the year. If you make that assumption, you’re not gonna be prepared for the growth that’s really coming in the commercial construction space in the second half of this year.

All of these data sets I mentioned today are in our Trends Report. So please head over to our website and check out our ITR Trends Report. But there’s good news on the horizon, and I think after how challenging the last 12 to 18 months have been for commercial construction, this good news is certainly warranted. Thanks for joining me on this episode of TrendsTalk. Please remember to like and subscribe to TrendsTalk wherever you listen to your podcasts. And I look forward to seeing you all on the next one. Thanks so much. Take care for now.