Q2 2026 Market Conditions Report

Our Q2 2026 Market Conditions report summarizes current market conditions, industry trends and mitigation strategies to make more informed business decisions in the quickly changing construction landscape.

Industry Insights

• Schedule certainty has eclipsed speed as the top priority, especially in complex environments like healthcare and occupied campuses, where early decisions drive outcomes more than late acceleration.
• Integrated delivery and early collaboration consistently outperform traditional models, reducing late-stage redesign, minimizing disruption, and improving reliability amid labor, regulatory, and operational constraints.

Mitigated Supply Chain

• The supply chain is functioning, but volatility has shifted from availability to pricing, driven by fuel costs, tariffs, geopolitics, and concentrated demand in power- and data‑intensive sectors.
• Early planning and visibility are now the primary risk mitigators, as procurement timing, material sourcing, and logistics decisions made upstream increasingly determine cost and schedule certainty downstream.

Core Market Insights

• Life Sciences: Manufacturing remains the anchor as companies advance capacity tied to long‑term pipelines and the approaching patent cliff, while R&D investment stays targeted amid funding and real estate headwinds.
• Healthcare: Capital investment is returning, but projects face stricter scrutiny—favoring strategies that improve speed‑to‑care, operational performance, and delivery certainty rather than growth alone.
• Commercial: Demand favors high‑quality, experience‑driven assets, while aging inventory faces repositioning pressure—creating opportunity for adaptive reuse, renovation, and phased upgrades.
• Higher Education: Deferred maintenance and research facilities dominate near‑term activity as institutions balance financial pressure with unavoidable infrastructure and STEM investment needs.
• Advanced Technology: Advanced manufacturing and data centers remain strong, but success increasingly depends on early alignment, power strategy, labor planning, and disciplined execution rather than rapid expansion.

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Healthcare construction schedules are under more pressure than ever. Tight budgets, workforce shortages, complex regulations and long lead medical equipment all leave very little room for delay. At the same time, the cost of missing an opening date, including lost revenue, delayed patient care and operational strain, has never been higher. As a result, healthcare owners are placing greater value on schedule certainty. They need confidence that a facility will open when planned, rather than focusing on speed alone.

Across the industry, projects that bring designers and builders together early consistently perform better when it comes to staying on schedule. Decades of research shows that early collaboration between design and construction teams reduces schedule overruns and late-stage disruptions, even on highly complex healthcare facilities.

At DPR, we pursue schedule certainty through an integrated approach we call Design-to-Build. Design-to-Build is not a contract type; it’s a way of working that embeds construction expertise into the design phase. No matter the procurement method, this approach helps teams make informed decisions earlier, understand cost and schedule impacts in real time, and minimize downstream surprises.

Healthcare schedule challenges result from layered regulatory and operational systems rather than scheduling variability. Projects must align clinical workflows, equipment planning, life‑safety systems, infection‑control strategies and regulatory approvals, often across multiple authorities and stakeholder groups. Many of these requirements directly influence the critical path and become increasingly difficult to change once execution begins.

Finally, a large share of healthcare work occurs on active campuses. Site congestion, interim life‑safety measures, infection control and operational continuity impose real constraints on sequencing. In these environments, late decisions and late changes tend to compound quickly and can often trigger rework, re‑review and disruption.

The Case for Integration

Multiple decades of independent research demonstrates a strong relationship between delivery approach and schedule outcomes. Studies summarized by the Design‑Build Institute of America (DBIA) report that integrated design‑build delivery performs best in schedule reliability and delivery speed compared to traditional delivery methods, with less schedule growth and faster delivery from design through completion in the studied project sets.

Healthcare‑specific research reinforces the conclusion that complexity does not eliminate the advantage. Comparative studies examining design‑build healthcare facilities alongside other building types found that schedule performance is driven less by project type and more by when decisions are made and how coordination is managed.

Certainty Is the New Schedule Priority

For healthcare owners, schedule certainty is directly connected to operations and finance. Activation milestones are tied to staffing plans, licensing, commissioning and service‑line strategies. Delays can defer patient access, extend reliance on aging infrastructure or require interim operational workarounds. In a constrained capital environment, these impacts compound quickly.

Recent industry surveys also highlight how late changes and readiness requirements create delivery friction. Healthcare facilities leaders increasingly emphasize commissioning, operational readiness and alignment across stakeholders as essential to opening-day performance.

At DPR, Design‑to‑Build is not a contract type. It is an integrated project approach that brings construction knowledge into the design phase regardless of contracting method, project type or design stage to improve outcomes. The approach is based on early team engagement, design integration and use of capabilities such as advanced VDC, self‑perform work and prefabrication.

Design‑to‑Build focuses on aligning decisions early, way before they become constraints in the field. Traditional models often separate design and construction into sequential phases; in healthcare, that separation can delay decisions on systems, phasing and procurement in schedules that already have limited flexibility. Design‑to‑Build closes that gap by integrating the right expertise early and continuously connecting decisions to their cost, schedule, and operational implications.

Three Mechanics Behind Schedule Certainty

• Decision cadence (own the decisions that drive the critical path). 
  Teams identify the decisions that affect approvals, procurement, sequencing and activation and then establish clear ownership and timing. In healthcare, float is often lost upstream; tracking decision readiness helps prevent late surprises that consume schedule contingency.
   
• Real‑time cost and schedule visibility (connect scope, cost and time).
  Rather than reacting after issues surface, teams maintain continuous visibility into how scope evolution, market pricing movement and procurement choices affect schedule commitments. This enables earlier tradeoffs and faster issue resolution, protecting the schedule without sacrificing outcomes that are most important to the owner.
   
• Procurement alignment and offsite strategies (reduce field exposure). 
  With long‑lead equipment and labor constraints, aligning design releases to procurement realities is essential. Early trade involvement helps teams determine what can be standardized or prefabricated, how it should be sequenced, and how it affects field logistics therefore shifting repeatable work offsite to reduce onsite congestion and dependency on scarce field labor.

Building on an active healthcare campus comes with real challenges. Teams have to manage safety, infection control, tight sites and day-to-day hospital operations, all while staying committed to a fixed opening date. That’s a lot to balance.

An integrated approach helps by tackling these challenges early, before construction starts and before crews are on site. Logistics, phasing and access planning are worked through during design, when changes are easier and less disruptive. Strategies like offsite fabrication and early coordination reduce congestion on campus and support cleaner, more controlled work alongside patient care.

Across complex, occupied projects, the same lessons show up again and again: align early, keep decisions transparent, stay disciplined with coordination and use standardization or prefabrication where it truly lowers schedule risk. These fundamentals translate well to any live environment, especially healthcare.

The global supply chain is functioning, but the environment around it is increasingly volatile, complex and policy-driven. Unlike the pandemic era, the challenge is no longer material scarcity, it’s pricing instability. Costs are entering through multiple channels and compounding as they move downstream.

Inflation re-accelerated in March and April 2026, while tariff policy is being actively restructured, creating both opportunities and uneven impacts depending on supply chain position and cost visibility. Compounding these pressures, energy and logistics—driven by Middle East conflict and oil above $100 per barrel—have become primary cost accelerants, pushing volatility into transportation, manufacturing, and material pricing.

Labor remains constrained, with demand concentrated in high-growth sectors like data centers, power and infrastructure, further tightening capacity.

Success in this environment depends less on prediction and more on discipline, including early planning, supply chain visibility and proactive procurement. The advantage goes to those who understand how cost enters the system, how it moves and when decisions can still influence outcomes.

To understand what is happening in the supply chain, it helps to start with the broader economic backdrop. From that perspective, the signals are relatively steady, but when viewed more closely, particularly through the lens of construction, the picture becomes more complex.

Unemployment has remained consistently in the range of 4% to 4.5% since mid-2024, and in April of 2026 was 4.3%,¹ the same as March and slightly down from February. Contractors across the industry continue to report difficulty finding workers, and not just in isolated trades. The shortage spans mechanics, ironworkers, electricians, plumbers, equipment operators, carpenters, concrete workers, pipefitters, sheet metal workers, drywall trades, and truck drivers.² That breadth is important. It indicates this is not a localized issue or a short-term imbalance; it is an industry constraint. It is also notable that these constraints persist even as some other segments of the economy show signs of cooling, so this is not merely a reflection of a ‘hot’ general labor market.

That labor constraint is echoed in wages. Construction wages are increasing faster than the broader private sector, approximately 5.1% compared to 3.7%.³ This gap reflects sustained pressure on labor supply. It is also tied, in part, to immigration dynamics, as a significant portion of the construction workforce in several trades is foreign-born. Changes in enforcement or availability in that labor pool can have an outsized impact on the industry, particularly in labor-intensive scopes where substitution is limited and schedule sensitivity is high.

While labor remains tight, inflation has reemerged as a more active factor. After remaining within a relatively stable range for much of 2025, inflation increased from 2.4% in February to 3.3% in March, and then to 3.8% in April.⁴ This sudden shift is happening concurrent with rising construction input costs. The Producer Price Index for construction materials rose 1.7% in a single month, the largest monthly increase since January 2022, and it has now reached a three-year high,⁵ driven largely by fuel cost escalation tied to geopolitical instability in the Middle East, and illustrating how global events feed into domestic construction costs.

Contractors are approaching 2026 with a more measured outlook. Some growth is still expected, but it is not evenly distributed. Data centers, power, transportation, and infrastructure continue to post the strongest gains,⁶ while other sectors are softer. That concentration matters because it pulls resources—materials, labor, fabrication capacity, and even power capacity—toward a narrower set of projects and sectors. Data centers, for example, are not just buildings; they are energy-intensive systems that require substantial power generation and transmission support.

This creates simultaneous demand pressure on both energy systems and related construction segments. Contractors surveyed by the Associated General Contractors of America expect these segments to remain strong, even as they reported lower overall expectations for 2026 relative to 2025. In fact, nearly two-thirds expect to increase headcount despite persistent workforce shortages. That suggests that demand remains real and durable enough to require hiring, even while firms remain cautious about the broader environment.

The top concerns of contractors? 

Economic slowdown, followed by labor availability, and rising direct labor costs. The market appears to be managing two forms of uncertainty at once: the possibility of macroeconomic slowing on one hand, and the reality of labor and pricing pressure on the other. 

Tariffs continue to further elevate cost pressure, particularly in metal-intensive trades, even though material lead times remain manageable, reinforcing that the current state is driven more by pricing volatility than by outright availability constraints. Material pricing trends entering 2026 reflect that pressure. 

A Q4 2025 market analysis identified aluminum, structural steel shapes, bar joists, rebar, precast concrete, and sheet metal products as the most significant cost movers. These are not niche categories; they are core inputs, and movement in these categories have a project-wide effect.

And GEP’s Supply Chain Volatility Index has increased, reaching a three-year high.⁷ That volatility is being driven by transportation costs, shifting demand patterns, stockpiling behavior, and uncertainty in global supply. 

Taken together, these signals point to a market that is stable in structure but increasingly dynamic beneath the surface. Labor constraints, shifting inflation, concentrated demand, and external cost drivers are all interacting at once. The market is not breaking down, but it is carrying more pressure than headline stability alone would suggest. Understanding how those pressures interact is key to understanding what comes next.

Tariffs have always influenced cost, but the pace and structure of recent changes have made them more difficult to predict, explain, and manage. The result is not simply higher prices in a broad sense. It is a system where trade policy is actively reshaping how cost enters the supply chain, where it sits, and who can manage it.

In February, a major inflection point came when the U.S. Supreme Court overturned the IEEPA-based “Liberation Day” or reciprocal tariffs that were imposed last year.⁸ The ruling took effect immediately and invalidated a tariff policy that had generated almost $170 billion in collections. Later that day, the administration implemented a 10% universal tariff, authorized for up to 150 days, while also indicating interest in pursuing permanence under alternate legal authorities. But on May 7th, a federal trade court ruled the 10% tariffs are unlawful, blocking enforcement for only two of the suing companies and Washington state; broader impact and appeals remain uncertain.⁹

For market participants, the legal back-and-forth continues to cloud the durability of U.S. tariff policy, leaving businesses navigating an environment where trade measures remain highly fluid and subject to ongoing challenge.

U.S. Customs and Border Protection (CBP) has since launched a refund portal to manage refunds (the Consolidated Administration and Processing of Entries, CAPE for short).^10,11 Practical challenges are significant. Only importers of record and brokers may file claims, and many companies lack the visibility needed to isolate tariffs embedded in multi-tier supply chain structures, especially in construction where materials may pass from overseas manufacturers through wholesalers, distributors, or subcontractors before they reach the project.

There are also new changes to Section 232 tariffs which are reshaping how duties are calculated on key materials such as steel, aluminum, and copper.¹² This change is intended to simplify tariff administration by eliminating the need to isolate embedded metal content across thousands of derivative products. But products that previously may have benefited from detailed valuation may now see higher effective duties, while other categories may see little change or reductions. Although this is a cleaner framework administratively, it seems to be in direct conflict with a long-standing rule to help manage cost for duties called the First Sale Rule.

Tariffs are no longer a background cost; they are pricing drivers. Their real-world impact depends heavily on how supply chains are structured, and whether the parties making project design decisions have visibility into where those costs are truly entering the system.

The conflict in the Middle East is not just a geopolitical event, it is a supply chain event, and one that touches nearly every part of the system. The reason is straightforward: energy sits underneath everything else. When fuel prices move, transportation, manufacturing, and delivery costs move as well. That is why the current disruption profile is so broad. It is not confined to a single commodity or route.

Following the escalation of conflict involving Iran on February 28, commercial traffic through the Strait of Hormuz declined by approximately 90%.¹³ The Strait is one of the world’s most critical chokepoints, handling roughly 20% of global oil supply and 25% of seaborne oil trade.¹⁴ That is why disruptions immediately translate into global pricing effects—it is a disruption to one of the world’s core energy arteries.

Crude oil prices surged above $100 per barrel,¹⁵ driving diesel and gasoline prices higher and triggering transportation surcharges across freight modes. Trucking companies, ocean carriers, manufacturers, fabricators, and airlines all respond to higher fuel inputs in some way—through surcharges, rate adjustments, reduced flexibility, or combinations of the three.

Construction industry data sources have already noted increased project delays and pauses tied directly to these fuel and logistics impacts.¹⁶ That is an important signal because it moves the issue out of the realm of abstract macro analysis and into project-level consequences. And when the Strait reopens, risk is expected to persist, as naval mines deployed during the conflict may take up to six months to clear, discouraging normal traffic flows.¹⁷ In other words, reopening does not mean things will return to the status quo instantly. 

A notable counterbalance is the United Arab Emirates’ departure from OPEC.¹⁸ In the near term, limited impact is expected while the Strait of Hormuz remains largely constrained. Over the longer term, however, the implications are more significant. Freed from OPEC production quotas that cap output at roughly 3.2 million barrels per day, the UAE could increase production closer to its estimated capacity of 5 million barrels per day—adding approximately 1%–2% to global oil supply. Once shipping routes normalize, this additional supply could exert downward pressure on oil prices and weaken OPEC’s ability to constrain production, with broader positive implications for fuel and energy pricing.

Transportation disruptions like those occurring today do not exist in isolation. The ripple effects extend upstream into materials, downstream into projects, and laterally across energy, manufacturing, and logistics simultaneously. This is precisely why energy has emerged as the clearest multiplier in the current environment—when it moves, everything else moves with it.

Impact extends well beyond fuel at the pump. 24% of the global aluminum supply comes from the Middle East, amplifying price increases through both physical disruption and elevated transportation costs.¹⁹ Rising oil prices also increase electricity costs, indirectly elevating manufacturing costs for energy-intensive materials. Aluminum prices have risen significantly and are approaching levels seen during previous peaks.²⁰

This is part of what makes fuel such a powerful multiplier. It is not just a transport input—it is embedded in material production as well.

Table

Industries Affected by Middle East Supply Disruption Risks

^{Source: WITS, Morgan Stanley Research}

The impact on material movement extends beyond fuel surcharges. Port overcapacity, lane disruptions, and schedule instability are compounding to create significant uncertainty in project delivery timelines.

There are also fundamental factors affecting logistics capacity. In March 2026, approximately 13,000 non-domiciled commercial driver’s licenses in California were challenged through federal enforcement actions requiring lawful domicile.³³ While intended to improve roadway safety, this move reduces the available driver pool and could contribute to higher transportation costs if freight demand tightens. 

All of this contributes to a system that still functions, but with more friction. Costs are higher, schedules are less predictable, and variability is increasing. That variability matters because construction schedules depend on coordination. Materials arriving late or inconsistently can disrupt sequencing, extend timelines, and increase costs in ways that go beyond transportation itself.
So, while logistics is not broken, it is operating under sustained pressure—and that pressure is being passed directly through to projects.³⁴

The natural question becomes: what can we do?

In many cases, risk does not start when materials are ordered—it starts much earlier, during design and planning. Supply chain problems increasingly emerge far upstream of procurement, reinforcing the importance of early engineering engagement, flexible design decisions, and scenario planning.³⁵

Decisions made during design and planning—material selection, sourcing strategy, supplier engagement, and timing—have a much higher impact on cost and flexibility. Once those decisions are locked in, options narrow quickly.

This is why early engagement matters

Understanding where materials come from, how they move, and what risks they are exposed to allows for better decisions before those risks become costs. It also allows for more flexibility. When alternatives are considered early—whether different materials, different suppliers, or different sourcing strategies—projects are better positioned to adapt to changing conditions instead of absorbing them passively.

Industry guidance suggests preparing for at least 12 months of continued transportation disruption, with potential freight rate increases approaching 40% once fuel, war-risk, and emergency surcharges are layered in.³⁶ That is an important forecasting signal because it sets a planning horizon. It suggests that current logistics disruption is not a short-lived event likely to normalize immediately. Rather, it should be treated as an operating condition, not a temporary anomaly.

The range of risks is expanding 

Traditional supply chain concerns—like availability and pricing—are now joined by broader factors such as geopolitical fragmentation, extreme weather intensification, aging infrastructure, and rising cyber threats targeting logistics networks.³⁷ In several assessments, geopolitical fragmentation emerges as the most significant threat to supply chain stability, followed by these other operational and systemic risks. These risks are less predictable and often harder to manage because they do not originate from a single market condition or supplier issue. They arise from the structure of the system itself.

That complexity makes it increasingly difficult to rely on manual processes alone. Managing this environment exceeds the capacity of spreadsheet-only tracking and reactive communication. Data, analytics, and emerging technologies like AI are becoming necessary tools for understanding and responding to change.³⁸ Their value is not in eliminating uncertainty, but in helping teams process more information, see patterns sooner, identify exposure more clearly, and make better decisions in time to make an impact.

The practical implication is that supply chain management is becoming less about chasing late-stage fixes and more about building resilient decision-making earlier in the project lifecycle. Projects that engage sooner, map supplier exposure, understand logistics conditions, scrutinize surcharges, and communicate risks early are better positioned to protect cost and schedule.

Construction disruptions rarely arrive all at once. They surface gradually—one supplier notice, one lead-time adjustment, one pricing change at a time. Historically, those signals were scattered across inboxes and often only became visible once the impact was already locked into a project. 

That reality began to come into focus in 2020, during the early stages of COVID recovery. Global manufacturing shutdowns had created widespread volatility, and as factories slowly restarted, demand surged across industries. Shortages began affecting both price and timing. At first, each notice seemed manageable on its own. But together, they pointed to something much larger.

Supply Chain Leader, Tim Jed, recalls, 

We started getting these letters in September. We didn’t have a good way to communicate this to our teams. We didn’t even have a good way to see it. When you start receiving multiple notices from the same vendor, that’s a signal of capacity stress. If you wait until they start canceling orders, it’s already too late.

That moment exposed a gap—not just in process, but in visibility. Teams  weren’t lacking information; they were lacking context. Supplier impacts were real, but they were isolated, arriving one at a time, without a way to understand their collective meaning or act early.

Out of that urgency came a shift in how supplier impacts are viewed today. Instead of living in individual inboxes, notices are surfaced together, allowing patterns to  emerge. What once felt like noise now functions as an early warning system.

That change fundamentally altered how teams engage with risk. Rather than reacting downstream, teams now have time. They have time to adjust strategies, accelerate purchases, re-sequence work, or explore alternatives while options still exist. Conversations shift from isolated decision-making to shared understanding, grounded in a clearer picture of what the market is signaling.

This visibility has become especially important over the past year as tariff-related market shifts have driven changes in material pricing and lead times. Owners and jobsite teams have asked how global tariff changes might translate into construction costs. In response, our dashboards were advanced to include a Tariff Related Impacts view, helping teams connect macroeconomic shifts to practical, project-level insight.

The tool doesn’t predict the future, but it does something essential: it highlights signals early enough to act. The further upstream those signals are captured, the more flexibility teams have to manage outcomes instead of absorbing disruption.

That idea mirrors a truth captured long before dashboards existed. In her poem “Little Things,” American poet Julia Fletcher Carney wrote:

Little drops of water, little grains of sand,
Make the mighty ocean and the pleasant land.

A single supplier letter is one of those drops. On its own, it rarely changes a plan. But when many are seen together, they form a current—revealing stress points, emerging trends, and opportunities to respond before disruption become unavoidable.

 Seen collectively, those small signals create leverage. They allow teams to prioritize partnerships, plan more predictably, and in some cases even influence vendor behavior. The power isn’t in any one notice—it’s in what becomes visible when they’re viewed together.

Photos: Lionel Branscomb, Danny Sandler and DPR staff.