U.S. data center construction spending increased 23% from a year earlier in May and reached 8% of all private nonresidential construction spending, according to federal data examined in a July 14 construction-market report. The rise in data center construction spending contrasted with a 22% decline in spending on manufacturing buildings, showing how artificial-intelligence infrastructure is concentrating demand for mechanical, electrical and cooling capacity even as other large project categories weaken.
Data Center Construction Spending Separates From Other Segments
The May figures show data centers continuing to expand while private nonresidential construction outside the category faces higher financing costs, elevated material prices and delayed projects. Data centers require unusually dense packages of electrical distribution, backup generation, controls, heat rejection and precision cooling. Their growth therefore supports a specialized group of mechanical and electrical contractors even when broader construction indicators soften.
Manufacturing-building spending fell to a seasonally adjusted annual rate of about $174 billion, 22% below the level a year earlier. The retreat follows several years of factory announcements tied to semiconductors, batteries, electric vehicles and reshoring. Some projects have moved forward, but others have been delayed, redesigned or absorbed into existing facilities as owners reassess costs and policy incentives.
The divergence is also visible in contractor backlogs and equipment lead times. Data center projects can reserve large quantities of switchgear, transformers, generators, air handlers, chillers and liquid-cooling components. That demand competes with hospitals, factories, commercial buildings and public infrastructure for engineering capacity and manufactured equipment.
The federal construction-spending series measures the value of construction put in place, rather than new contract awards or total announced investment. A project contributes to the monthly estimate as work is completed. That makes the data a measure of active construction, not the full pipeline of proposed campuses.
Data Center Construction Spending Meets Higher Input Costs
Construction-material costs have increased more than 55% since 2020, according to the market analysis accompanying the May figures. Contractors and owners have also faced labor constraints and longer delivery schedules for key electrical and mechanical products. Those conditions can raise budgets even when the physical scope of a project does not change.
The cost environment has affected smaller industrial projects in particular. Companies considering plant expansions have reported bids well above early estimates, causing some to cancel additions or use existing space. Data center developers, by contrast, are backed by large technology companies and infrastructure investors pursuing rapid computing-capacity growth.
Cooling requirements are evolving within the expanding data center category. Conventional air-cooled rooms remain common, but higher-density artificial-intelligence servers are increasing the use of direct-to-chip liquid cooling, coolant distribution units and hybrid heat-rejection designs. The construction-spending data do not separate air and liquid cooling, but the project mix is changing the equipment ordered for new campuses.
Mechanical scope can include central chilled-water plants, plate-and-frame heat exchangers, pumps, water-treatment systems, dry coolers and building-management controls. The exact configuration depends on climate, server density, water availability and owner design standards. As spending grows, those systems account for a substantial share of project procurement.
Outlook for Data Center Construction Spending
Technology companies have announced hundreds of billions of dollars in capital expenditures for 2026, with data centers representing a major component. The pace of actual construction will depend on power availability, permitting, land, financing and the supply of critical equipment. Several states and municipalities are also reviewing incentives and environmental requirements.
The same constraints that have slowed factory construction can eventually affect data centers. Utility interconnection queues, local opposition and shortages of specialized labor have already delayed some projects. New York’s one-year pause on permits for projects above 50 MW illustrates the growing policy scrutiny around the category.
Data centers accounted for about 8% of private nonresidential construction spending in May, according to the reported federal figures. Manufacturing-building spending was running at an annualized rate of about $174 billion, but the year-over-year decline shows how quickly the factory boom has cooled from its earlier peak. The two categories are competing for many of the same electrical and mechanical inputs even as their headline growth rates move in opposite directions.
Construction-material costs have risen more than 55% since 2020, adding pressure to projects outside the best-funded digital infrastructure programs. Long lead times for transformers, switchgear and generators can also affect chiller plants and other mechanical packages because commissioning cannot proceed until the complete power and controls sequence is available.
May’s data center construction spending figure confirms that the sector remained one of the clearest areas of growth in U.S. private construction entering the summer. The next federal releases will show whether the 23% annual increase continues as new projects move from announcement into active building work.
