ALTOONA, Pa.—While the ongoing nationwide surge in artificial intelligence-related data center construction continues to drive growth in certain sectors, traditional commercial and industrial building projects in the United States are experiencing significant setbacks.
The construction of data centers has risen sharply, with a 23% year-over-year increase reported in May. These projects now account for approximately 8% of all private nonresidential construction activity, reflecting intensified investment fueled by advances in AI technology. This surge has resulted in a concentrated boom for data center development but has not extended to other segments of the construction market.
Industry sources report that soaring material costs and supply shortages are curtailing expansion plans across traditional sectors. Mitchell Metal Products, a manufacturer based in northern Wisconsin, recently scrapped a proposed facility expansion involving robotic welding technology after construction bids came in at three times the anticipated cost. Such developments underscore the challenges faced by companies seeking to grow amid an increasingly expensive construction environment.
Since 2020, prices for essential building materials have escalated by approximately 55%, with electrical transformers—critical components for many industrial projects—experiencing a 70% price rise over the past five years. This inflation has contributed to prolonged backlogs for equipment and materials, extending project timelines and boosting overall expenditure.
Additional factors complicating the industry’s outlook include higher electricity rates and shifts in government policy. Recent reductions in incentives for green energy initiatives have removed a key source of support for many construction endeavors. Moreover, tariffs introduced during the Trump administration have further inflated domestic material costs, exacerbating delays and budget overruns.
Construction contractors and analysts alike have noted a lack of market depth beyond the AI-driven data center segment. Industrial building expenditures, excluding data centers, have declined sharply; spending on manufacturing facilities dropped 22% year over year to $174 billion. These figures highlight a near standstill in traditional construction activities as the sector contends with multifaceted economic pressures.
The current landscape illustrates a bifurcated construction industry: a burgeoning data center market buoyed by AI investments contrasts with widespread stagnation in other commercial and industrial projects, driven by cost challenges and supply chain constraints. How long these conditions persist remains uncertain, though industry observers warn that without relief in pricing and policy support, recovery in conventional segments may be slow.