Construction Leaders Are Rethinking Growth in a More Constrained Market

Construction Leaders Are Rethinking Growth in a More Constrained Market

The construction, architecture and engineering industry is entering a more measured phase, defined less by rapid expansion and more by disciplined, performance-driven execution. Insights from Grassi’s 2026 Construction and A&E Survey show an industry that remains optimistic, yet increasingly pragmatic. More than half of firms expect revenue growth in the coming year, but only a small percentage anticipate meaningful gains. As a result, firms are placing greater emphasis on disciplined execution, profitability and operational performance.

Revenue expectations continue to trend positively, with 51% of firms anticipating an increase. Only 9%, however, expect that increase to be substantial.

Backlog expectations remain restrained, with many firms expecting little or no growth. As a result, performance can no longer rely on volume alone. It must come from stronger pricing, project selection and execution.

Cost Pressure Continues to Reshape the Industry

The most consistent theme across the survey is the persistence of cost pressure.

· 60% of respondents rank inflation and cost escalation among their top concerns

· 80% report rising overhead costs

· Labor costs and skilled labor shortages remain among the most significant workforce challenges

Material volatility, labor constraints, and supply chain instability continue to influence both bidding strategy and project delivery. General contractors and subcontractors, in particular, cite cost escalation and labor issues as their most significant risks.

The result is a tighter operating environment where small misalignments in cost assumptions can have an outsized impact on profitability.

Financial Visibility Is Emerging as a Leadership Priority

Only 25% of firms report being highly satisfied with their financial and operational data. Job costing, cash flow forecasting and real-time profitability tracking remain significant challenges. As market conditions become more complex, leaders need timely information to make confident decisions.

The ability to turn data into actionable insight is becoming essential for maintaining profitability and supporting growth.

Technology Investment Signals a Shift Toward Insight-Driven Operations

Despite ongoing challenges, technology spending is accelerating.

· 88% of firms plan to invest in technology over the next 12 months

· Approximately half are already using AI in some capacity

Technology investments are increasingly tied to operational priorities, including:

· Better financial visibility

· Real-time project insight

· Improved forecasting and planning

Firms are increasingly recognizing that operational efficiency and financial clarity are closely linked. Technology is becoming the bridge between the two.

Succession and Long-Term Strategy Are Moving to the Forefront

Alongside near-term pressures, long-term planning is becoming more urgent.

Nearly half of firms cite future-proofing through succession and organizational planning as a top priority.

Succession planning is rising on leadership agendas as firms focus on long-term continuity and resilience. For many organizations, future-proofing the business is becoming as important as managing today’s challenges.

A More Disciplined Era of Construction and A&E Leadership

The current market is not defined by decline. It is defined by complexity.

Firms that succeed will be those who:

· Maintain pricing and margin discipline

· Strengthen financial visibility and reporting

· Invest selectively in technology and operational efficiency

· Align strategy with evolving risk conditions

These industries are moving from expansion-first thinking to performance-driven leadership. That shift may ultimately define the next cycle of success.

If you are assessing how these trends affect your firm’s growth, margins, or financial strategy, connect with a Grassi Construction and/or A&E advisor to discuss the opportunities and challenges ahead.