January 28, 2026
7 Key Insights from the 2026–27 Construction Forecast
Lighting demand expected to shift as stable sectors offset broader construction slowdown
Each January, the American Institute of Architects (AIA) releases its Consensus Construction Forecast — a composite outlook compiled from nine leading economic firms including Dodge Construction Network, Wells Fargo, S&P Global, Moody’s Analytics, FMI, and others. It represents a rare moment of alignment — or disagreement — among the people paid to predict where construction is headed.
The latest forecast doesn’t ring any alarm bells. Instead, it lands with a quiet thud: nonresidential building spending is expected to increase just 1.0% in 2026, followed by 2.2% in 2027. These figures, unadjusted for inflation, suggest that many firms will be doing more with less—if they’re growing at all.
* Average projected 2025 construction spending across nine forecasters participating in the AIA Consensus Construction Forecast.
But the average masks a fractured landscape. Data centers are surging. Manufacturing is falling. Offices are shrinking. And for lighting professionals trying to find growth in a slow-growth environment, reading between the lines of this sectoral divide is more important than ever.
As AIA Chief Economist Kermit Baker put it, “Spending on nonresidential building over the second half of last year was disappointing.” Mid-2025 projections had anticipated gains—reality delivered a broad contraction. And 2026 looks to offer more fragmentation, not less.
1. Data Centers: Low Voltage, Low Margin
The standout story in the AIA report is the continued explosion in data center construction, with projected growth of 26% in 2026 and another 16% in 2027. These are massive, often megaproject-scale facilities — 200,000 square feet or more — that drive serious demand for electrical gear: conduit, switchgear, cable trays, and the power-dense components that keep AI infrastructure humming. That’s a windfall for many parts of the supply chain.
But for the lighting side of the industry, data centers are deceptively low-margin in terms of design complexity. These are sparsely populated environments that prioritize uptime and function over architectural appeal. Think LED strips, flat panels, emergency fixtures, and utility-grade controls — not high-end architectural packages.
There’s still opportunity here, but it's not in custom spec work. It’s in bulk, reliability, and integration into 24/7 operational systems.
That said, the projections themselves are far from consistent. Forecasts for 2026 range from +15.5% to +45.2%. That’s not a consensus—that’s a collection of competing scenarios. Some economists are betting on a multi-year AI supercycle. Others expect supply chain challenges or the surge to taper once capacity catches up.
2. Manufacturing: From Megaprojects to a Measured Retreat
After three years of breakneck expansion driven by the CHIPS Act and EV supply chains, manufacturing is now in reverse, with AIA’s panel projecting a 3.9% decline in 2026 and another 0.9% dip in 2027. For lighting manufacturers, that could mean softness in industrial fixtures, high bays, and large-scale design-build packages.
What’s less clear is whether this is a pause or a cliff. While some economists argue that megaprojects are now moving from groundbreaking to buildout, others believe the pipeline remains strong. But for now, the demand surge is slowing — and the construction lighting supply chain will feel it.
3. Offices: Construction by Subtraction
Despite a forecast 6.0% growth in 2026, the office market isn’t staging a comeback. AIA’s report makes clear that growth is entirely driven by data centers, which are technically lumped into the office category in government reporting.
Strip those out, and we’re looking at double-digit declines in traditional office spending. Vacancy rates remain high, with conversions to residential underway in many metros. For lighting firms, the message is simple: unless you’re specifying for office-to-housing conversions or select repositioning projects, this sector remains in contraction mode.
4. Institutional: Predictable, If Not Exciting
Institutional construction — covering health care, education, and recreation — is the most stable category, with consensus forecasting 2.7% growth in 2026 and 2.8% in 2027. The real opportunity lies in healthcare, which is projected to grow around 4.6% this year, driven by aging demographics and outpatient facility expansion.
Education and recreation spending, meanwhile, are expected to remain flat. Demographic decline and federal funding pullbacks are taking their toll on school construction. Still, the low volatility in this sector offers lighting firms steady, if unspectacular, demand — especially in retrofit and code-compliant upgrades.
5. Retail, Warehouse, and Recreation: Market Correction Mode
Lighting people who stocked up for warehouse and retail buildouts may want to tap the brakes. These sectors are forecast for minimal to no growth in 2026, recovering only slightly in 2027. The warehouse sector, in particular, appears to be digesting pandemic-era overbuilding, with demand flattening and some projects getting shelved or scaled back.
In retail, the story is less about collapse and more about fragmentation. Experiential and neighborhood retail may sustain investment, but malls and big-box footprints continue to shrink. Lighting firms positioned for selective adaptive reuse and smaller-scale projects will likely fare better than those banking on volume.
6. Health Care and Hotels: Niche Growth in a Flat Landscape
Two sectors provide modest bright spots beyond data centers. Healthcare, as mentioned, remains on solid ground, thanks to demographic certainty. Hotels, meanwhile, are expected to grow by 3.2% in 2026, accelerating to 5.3% in 2027 as business and leisure travel recover.
For lighting professionals, that means renewed demand for hospitality-grade fixtures, ambient lighting, and architectural upgrades — but growth will be selective. Oversupply and uneven travel recovery make this another “right place, right project” environment.
7. Forecast Variability: The Consensus Isn’t Really Consensus
Perhaps the most useful insight from the AIA forecast is not in the averages — but in the spreads. In 2026, economists disagree by:
- 8.1 points on total nonresidential construction
- 29.7 points on data centers
- 23.7 points on manufacturing
- 23.5 points on offices
These aren’t variations. They’re signs that economists are modeling different futures entirely — one where AI transforms infrastructure, another where demand normalizes fast. For lighting firms, that means treating these projections as scenario planning tools, not blueprints.
Final Insight: Read the Mix, Not Just the Market
Bottom line for lighting makers: this is a year when product mix may matter more than overall volume. Data centers, healthcare, and institutional retrofits will drive growth, while offices, warehouses, and manufacturing demand tighter targeting.
Companies with agile go-to-market strategies — those who can pivot toward spec-heavy, high-growth sectors while trimming exposure to legacy categories — will outperform.
The message from AIA’s forecast isn’t “prepare for a downturn.” It’s “prepare for divergence.”
