2026 Market Planning Guide

Data center expected to continue rapid growth

Lipinski said data centers are the primary driver of activity in the construction market, “with hyperscale demand notably robust and no signs of a slowdown.”

“Strength in this vertical favors larger distributors who can meet the increasing order sizes, he said. “The data center market in the United States has grown to the point of parity with office construction in dollar value. Further, the electrical intensity in a data center is much higher than for an office building or any other nonresidential application. This is contributing to the bifurcation of results, with data center strength more concentrated in larger distributors versus general construction activity, which is more relevant for a broader swath of players.”

He added that outside of data centers, the general industrial and construction landscape is relatively subdued, although there were pockets of strength in food and beverage.

Lipinski also said there were clear regional and industry sector divergences in the distributor commentary in Q3, and that distributors large enough to participate in the data center end market (particularly hyperscale) are seeing a continued robust demand environment that actually seemed to accelerate in the quarter.

A recently published research report on data centers, “Data Centers Lead the Way,” also pointed to the huge impact data centers are having on the electrical construction industry. Author Kevin Coleman said electrical products and systems account for 40% or more of the total construction spend in data centers. Published by  Channel Marketing Group, Raleigh, North Carolina, and DISC Corp, Houston, Tex., the report also said that from March 2024 through the third quarter of 2025, data center investments accounted for over 70% of the increase in private nonresidential construction spending in the United States.

"The numbers are staggering,” wrote Coleman. “At the current pace, 2025 data center construction starts will hit $46 billion — a 55% year-over-year growth rate. And this isn't a temporary spike. McKinsey estimates that by 2030, data centers will require $6.7 trillion of investment worldwide to keep pace with demand."

Kermit Baker, the chief economist for the American Institute of Architects (AIA), Washington, DC, and author of one of the best construction forecasts available, the AIA Consensus Construction Forecast, said growth in the level of spending on data centers is unprecedented and is expected to continue at an elevated pace. “After increasing by more than +50% in 2024, spending is expected to grow by another +33% in 2025 and by an additional +20% in 2026, he said in the AIA forecast, which was published in July. “However, even in this sector, there are growing concerns that electrical equipment shortages, power requirements and community opposition may slow the pace of growth.”

Slow growth ahead for nonresidential market

In his July update to AIA’s Consensus Construction Forecast for 2025-2026, Baker says there’s both good and bad news about nonresidential construction spending on buildings. “First the good news,” he said. “In spite of stubbornly high long-term interest rates, inflation rates stalled above the Federal Reserve Board’s target, falling consumer confidence scores, disappointing levels of home building activity, rising tariff rates for many inputs to construction and construction labor shortages exacerbated by restrictive immigration policies, the outlook for the remainder of the year and into 2026 is largely unchanged from where it was at in the beginning of the year.

“The bad news: The outlook for spending entering the year was very pessimistic. The consensus is that overall spending on nonresidential buildings not adjusted for inflation will increase only +1.7% this year and grow very modestly to just +2% next year. The commercial sector outlook is about on par with the broader industry, with a projected +1.5% increase this year rising to +3.9% in 2026. Spending on the construction of manufacturing facilities — the industry’s bright spot in recent years — is expected to decline -2% this year, with an additional decline of -2.6% next year. Institutional facilities are expected to be the strongest sector with projected gains of +6.1% this year and another +3.8% in 2026.”

Pricing and tariff concerns

Overall electrical product price increases have moderated, but several product categories are still seeing double-digit YOY increases. According to the latest Electrical Price Index published monthly by Electrical Marketing newsletter at www.electricalmarketing.com, prices for building wire (+10.2%); switchgear (+11.9%); and fuses (+10.5%) are up double digits year-over-year through August 2025.

Price increases for base materials are also an issue in other parts of the construction market. According to ConstructConnect’s recent 2026 Fall Outlook, steel prices are up +13%; aluminum is up +23%; and copper products have increased by +4.9% year-over-year.

VRP’s Lipinski said in his analysis of the survey results that pricing was relatively stable sequentially at approximately +3%. "While a pickup in pricing may have been expected as tariff-related actions flow through, we suspect the similar sequential result reflects the tactical nature of price increases, as well as the strategic use of surcharges,” he said.

He added that in addition to the solid pricing contribution, distributors generally pointed to a release of pent-up demand from still healthy backlogs as tariff uncertainty subsided.

Tariffs are still a bit of a wild card, but they are still having an impact on prices and delivery schedules. In the ConstructConnect webinar, Ken Simonson, chief economist for the Associated General Contractors, Arlington, VA, said tariff-driven cost increases are causing delays and cancellations for some projects.

“Tariffs may help some manufacturers, and certainly we've seen dramatic announcements by some CEOs and even heads of state about investments that they'll be making. But those often lack specificity as to time, place, or purpose,” he said. “Meanwhile, other manufacturers are holding off because they want to see what their competitive position will be once they have to pay tariffs on their own inputs — not just on the manufacturing construction costs — and whether they're going to face retaliation or discrimination from foreign competitors.”

Using EW’s 2026 Market Planning Guide

This is the second year EW’s Market Planning Guide will be published in an all-digital format. Like last year, it uses online mapping tools to present our local, state and national market data. We still present market summaries, sales estimates and employment data by the U.S. Census Dept. regions, as we have done over the past few years, and we used EW's sales-per-employee multipliers to develop our sales estimates. 

The sales potential estimates in the regional data cover all states and the largest MSAs within those regions. Access to our sales estimates for all 300-plus MSAs is available as part of a $99 annual subscription to Electrical Marketing (www.electricalmarketing.com). These sales estimates are updated quarterly. You can subscribe online for that data and see all the other market data available at https://www.electricalmarketing.com/industry-stats/article/20916398/join-electrical-marketing. We do offer employment data for all MSAs and encourage readers to use it to develop their own sales projections if an MSA you need is not available here.

Methodology. To develop our national sales potential estimate of $151.183 million, as mentioned we used the EW multiplier in combination with the latest available employment data available from the U.S. Bureau of Labor Statistics (www.bls.gov) for construction and industrial employment. We used 3Q 2025 (June 2025 – Aug. 2025 data. Since BLS doesn’t publish electrical contractor employment at the MSA level, we estimated it at 13% of total construction employment, its historical average.

Electrical contractors and industrials combined typically account for 75% of all electrical sales, and we use the sales-per-employee estimates for electrical contractors ($78,775 per employee) and industrial accounts ($2,650 per employee) to estimate core electrical sales. To get to our total sale estimate figures, we then add 25% on top of that estimate to cover all other distributor end-user markets (utility, government, retail, etc.) 

Summary

Growth should be steady if unspectacular in 2026. Our best guess is that 2026 electrical sales through electrical distributors will increase between +2% to +4%. If the tax cuts that take effect next year help charge up capital spending and if Federal rate cuts trim back residential mortgages and construction loans, growth could easily top that low single-digit rate.

As has typically been the case in the electrical market, you can expect a comparatively small number of local markets to account for a large share of the roughly $151.2 billion total estimated sales through electrical distributors. For example, when measured by total estimated electrical sales, the 50 largest Metropolitan Statistical Areas (MSAs) account for an estimated 54.6 % of all sales, while the 100 largst metros account for 67.5%. On the state level, the 10 largest states account for 51% of all sales. Those states are: California ($15.9 billion); Texas ($14.5 billion); Florida ($9.9 billion); New York ($6.4 billion); Ohio ($5.8 billion); Pennsylvania ($5.3 billion); North Carolina ($5.2 billion); Illinois ($5.2 billion); Michigan ($4.8 billion); and Georgia $4.4 billion).

Data centers continue to dominate the construction market in 2026 and be what one electrical manufacturer called “a once-in-a-career opportunity,” but some industry observers are concerned about possible overbuilding and what happens to the construction market when demand for them eventually slows down.

Mega-projects valued at $1 billion or more also show few signs of slowing down. Hospitals, K-12 schools and universities projects tend to be much smaller than data centers and other mega-projects, but there’s a ton of them in the pipeline valued at $100 million to $400 million.

Two other markets to consider in 2026 for new revenues: retrofit work in existing office buildings and lighting retrofits. Office retrofit work will produce plenty of sales opportunities for distributors, reps and manufacturers, although the dollar volume won’t match what we used to see in new office construction, which is still getting crushed in most markets because of historically high office vacancy rates topping 20%, and has yet to recover from the move to remote officing.

The news from the lighting market is that the first generation of LED lighting systems that were installed a decade or more ago are aging and will need to be replaced over the next few years with the latest LED and control technology.

All in all, few folks are calling for spectacular growth in 2026, unless they are in just the right mix of end user markets (particularly data centers), and local markets (think Sunbelt/Intermountain regions).  But with few economists calling for a recession or any dramatic downturn in business, 2026 should be at worst a quietly positive year.