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Construction backlog rose slightly to 8.1 months in February, according to the Associated Builders and Contractors, recovering from a four-year low. However, the pipeline is increasingly uneven. Large contractors and firms building data centers hold significantly stronger backlogs, while smaller builders and those outside the AI infrastructure boom face weaker demand. Rising oil prices and geopolitical uncertainty involving Iran could further pressure construction costs and slow non-data-center projects.
➤ SIGNAL
The February Construction Backlog Indicator from the Associated Builders and Contractors shows the industry stabilizing after a recent slowdown, but the work pipeline is becoming increasingly concentrated.
Industry backlog increased slightly to 8.1 months, up a tenth of a point from January. That modest improvement masks a widening divide within the construction sector.
Large contractors are holding the majority of the work. Firms generating over $100 million in annual revenue reported 12.1 months of backlog, while contractors tied to data center construction recorded 11.2 months of work on their books.
By contrast, contractors without data center projects reported just 7.6 months of backlog, highlighting how strongly the artificial intelligence infrastructure boom is shaping the construction pipeline.
This divide matters because data centers represent a relatively narrow slice of total commercial construction. While AI-driven demand is producing large project pipelines, it does not translate into broad-based construction activity across sectors such as office, retail, or traditional commercial development.
Regional results reinforce that uneven pattern. The Middle States region saw the strongest gains, with backlog increasing by a full month compared with January and rising 1.2 months year over year, reflecting stronger population and economic growth across parts of the Midwest.
Sector performance was similarly mixed. Commercial and institutional construction and heavy industrial projectsposted month-over-month increases in backlog, while infrastructure work declined from 10 months of backlog to 8.9 months, giving back some of January’s gains.
Contractors themselves remain cautiously optimistic. The Construction Confidence Index, also released by Associated Builders and Contractors, showed expectations for sales and hiring increasing, with all three forward indicators remaining above the 50 mark that signals expansion.
However, that optimism may be vulnerable to rising energy costs. Higher oil prices tied to geopolitical tensions involving Iran could increase materials costs, transportation expenses, and borrowing costs—factors that historically slow new project starts.
For commercial real estate development, the implication is structural rather than cyclical. Construction demand is increasingly concentrated in sectors tied to technology infrastructure and industrial expansion, while traditional commercial projects remain sensitive to financing costs and investor sentiment.
Key Takeaway
Construction activity is not broadly accelerating—it is becoming more concentrated. Large contractors tied to data center development are capturing the majority of new work, while smaller builders and traditional commercial sectors face thinner pipelines. If energy prices rise and financing remains expensive, that divide between AI-driven construction and conventional CRE development could widen further over the next year.
CRE 360 Signal™ — Commercial Real Estate Intelligence
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