The design economy just told builders what most already felt: 2026 is a down year.
The American Institute of Architects’ mid-year Consensus Construction Forecast now projects nonresidential building spending will fall 0.3% this year, down from the 1.0% gain its panel expected in January. Spending had already dropped about 7% in nominal dollars over the first five months, according to the forecast reported by Building Design+Construction.
A market splitting in two
The panel’s own language is blunt: the market has gone K-shaped. Work tied to public funding, healthcare demand, and AI investment keeps advancing, while interest-rate-sensitive and discretionary categories keep sliding. That split shows up in the sector numbers. Manufacturing, which carried nonresidential construction for two years, took the sharpest cut, now forecast down 11.6% as chip and battery projects slow. Institutional held roughly flat, still projected up about 2.8%.
Where the growth still lives
Healthcare is a big reason institutional is holding. Projects like Atrium Health’s billion-dollar bed tower in Charlotte reflect demographic demand that doesn’t care about the rate cycle. Pharmaceutical plants are pulling manufacturing’s average up even as semiconductors drag it down. The pattern is consistent: money follows either a public mandate or a demand curve too steep to wait out.
The bet on 2027
One number cuts against the gloom. The panel raised its 2027 forecast to a 3.0% increase, up from 2.2%, which reads as a wager that the current softness is a pause, not a slide. That call rests on rates easing and the tariff uncertainty clearing. Both are assumptions, not facts, and the forecast is honest about it. For now, contractors chasing private, discretionary work are competing for a shrinking pool, and it shows in bid lists.