The cost of building things in the U.S. is still trending upward, and at a rate greater than overall inflation, Skanska executives said in a recent webinar.

Interest rates, tariffs and now diesel costs spiking amid the war with Iran can be expected to raise costs, the executives said in their 2026 briefing on Thursday.

“We think cost escalation in construction is going to outpace U.S. inflation, and fairly significantly,” said Steve Stouthamer, Skanska’s executive vice president for project planning.

Skanska’s composite cost index in the past year has risen 6.8 percent, which Stouthamer called “very significant.” Most markets will see inflation between 4 percent and 6 percent this year, he said.

Spiraling prices for diesel and regular fuel can be expected to reverberate through the construction industry, the executives said. On Monday, diesel averaged $4.91 per gallon in Oregon, up 66 cents in the past week, according to AAA.

Tariffs continue to boost costs, despite a U.S. Supreme Court ruling striking down some of the Trump administration’s levies on trade.

“It’s just the reciprocal tariffs that have been struck down — all of these other ones remain,” said Rob Cantando, Skanska’s director of strategic supply chain.

The duty paid on aluminum has risen 3.5 times since early 2025 when President Donald Trump first instituted a series of tariffs.

“This really shows how aluminum pricing has escalated in the U.S. above the rest of the world,” Cantando said, adding that it’s sending prices upward for curtain wall and storefront extrusions.

Copper and other building materials also remain elevated.

It’s not all bad news on costs, however. Manufacturers are beginning to catch up on demand for some building systems, including heating and cooling units.

“We are expecting lead times for HVAC equipment and electrical gear to fall this year, and that’s really due to expansions — (manufacturers) continuing to ramp up,” Cantando said. “There have been significant investments by many manufacturers in this area.”

Costs for plumbing fixtures, HVAC and electrical gear should begin to moderate due to the elimination of some tariffs, he said.

Activity in the construction industry is being propped up by massive tech projects — data centers and other tech-related megaprojects, driven by demand for artificial intelligence, data and cloud restructure.

Data center developers are expected to build 8 gigawatts of infrastructure this year, totaling 32 million square feet. In monetary terms, that’s a spend of an estimated $40 billion to $80 billion.

An estimated 50,000 to 75,000 electricians are working exclusively on data center construction, Skanska officials said.

“A few years ago, we had a number of regions in the country that could probably hide from what the data center impact was doing, but now that demand is spreading across the country to locations where there is power capacity (and) land availability,” Stouthamer said. “Most markets around the country are feeling the impacts of the significant growth in the data-center market.”

In contrast, traditional residential and commercial construction remain soft, the Sweden-based global construction giant reported last month.

“Interest rates have led to reduction in commercial work,” Stouthamer said.

Recovery in housing and other private sectors is likely to be gradual, hinging on further interest rate reductions, improved consumer demand and reduced input costs, Skanska stated in its winter 2026 report.

“More optimal conditions may not materialize fully until 2027, but even that is highly speculative,” the report stated.

Skanska officials recommended contractors forecast budgets to the midpoint of construction, not just the procurement stage. Other cost-conscious measures they recommended include having flexibility in project specifications, early planning with project partners and producing more frequent budget updates.

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MOUNT PLEASANT, Wis. — The Mount Pleasant Village Board unanimously approved site plans for two Microsoft developments that include 15 data centers.

Comments for and against the developments were delivered by residents and union workers during the Jan. 26 meeting.

Village President Dave DeGroot thanked the commentators for being civil but took exception to one speaker calling the jobs at the data centers temporary.

In addressing the union members present, DeGroot said, “It’s my understanding that you’re going to be out there on those sites for the next 10 years doing your job, applying your trade. And I don’t see anything temporary in 10 years.”

He also addressed concerns about data centers in general, and particularly in the village.

“We understand that you want us to go with caution, but I’d like to take you back to 2017 when we first put this TID together,” DeGroot said. “This tax increment district is the mother of all tax increment districts because of the opportunity at the time — Foxconn.”

In 2017, the Foxconn Technology Group, along with the help of the Wisconsin Legislature, came to Mount Pleasant to build a giant advanced manufacturing campus. However, after a few years, Foxconn amended its plans, and land was left vacant after the village and Foxconn bought out the previous property owners.

But in 2023, Microsoft stepped in to buy the land and build its first data center. The company announced in 2025 that it would add a second data center. In total, the company has committed at least $7.3 billion to the area.

Microsoft did not comment on the timeline for construction, but a spokesperson said, “Microsoft is excited to have completed the next step in our development process and look forward to sharing more about our specific expansion plans in Mount Pleasant as we go forward.”

Foxconn “didn’t turn out quite the way we thought it would,” DeGroot said, but added that the village’s vision at the time was for the area to become a technology park.

“We got laughed at for that,” he said. “‘Oh, come on. Technology? That goes to California. That goes to Texas. That goes to the East Coast. How on Earth do you think you’re going to bring it to Mount Pleasant? Well, we did.”

DeGroot said he understands that some residents might feel that the project is “out-scaled, and it is truly the largest project in the state of Wisconsin by a large factor.”

“It’s coming,” DeGroot said. “It’s coming in stages. And as I mentioned, it’ll be building for the next 10 years.”

Mount Pleasant resident Jack Nehmer commented on the project information presented during public meetings.

“I do not feel as if … the community (members), who voted you into offices, understand the true impact of this proposal,” he said. “It’s on a scale that no one was prepared for when we heard about Microsoft initially building a data center. One or two data centers, we can all live with that. Fifteen to 20? That’s significant.”

Mount Pleasant resident Tony Martino called for village officials to pause the project.

“The raw truth is the jobs are short term,” he said, “and (much) of the labor is not from Mount Pleasant, Racine County or even the state of Wisconsin. The money leaves Mount Pleasant on payday.”

Martino also criticized a tax increase that could come from the project until the TID is closed.

“While there’s an increase in the tax base, it will actually prove to hurt the people of Mount Pleasant for the next eight to 10 years,” he said. “If Mount Pleasant does become the richest community in Wisconsin, it will be on the backs of hardworking residents, not Microsoft.”

Years of public hearings on Foxconn led to this moment.

At the start of the meeting, Chris Smith, an attorney for Mount Pleasant, attempted to quell anxiety about the project.

“For anyone who says ‘When did we do this? We didn’t know about this. (The village) did it behind closed doors. We did it without telling the public.’ Nothing can be further from the truth,” Smith said. “This land was rezoned in 2017 to allow industrial uses. That includes data centers.”

Smith reminded attendees of public hearings and meetings in 2019, 2020 and 2023 held “to make it abundantly clear in our zoning code that data centers could be built on this land.”

“As far as Microsoft’s right to construct data centers on the land it owns, that is a property right and that’s not something the village can legally take away,” Smith said.

Racine County Executive Ralph Malicki spoke in support of the project.

“What we’re looking at here is a generational and regional opportunity like we’ve never seen before,” he said. “Not just talking about the taxes or the union jobs. What we’re talking about is Microsoft — a very, very reputable company, looking to partner with our entire area.

“They’re looking at being a great corporate resident … the ripple effect throughout our area, not just Mount Pleasant, not just Racine County, but the region will be incredible.”

Microsoft’s first data center in Mount Pleasant is being finished. Plans call for breaking ground on a second data center this year. The company is on track to be Racine County’s largest taxpayer when it pays its bills in 2026, based on 2025 assessments.

Editor’s note: This article first appeared in the Milwaukee Journal Sentinel and then was distributed on the USA TODAY Network via Reuters Connect.

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Data center construction is slowing nationwide as U.S. electrical infrastructure struggles to keep up with demand, according to a CBRE report.

Nationally, data centers totaling 5,242.5 megawatts were under construction in the first half of the year, down 17.4 percent from 6,350.1 megawatts in 2024, according to the brokerage.

Data center investments fell by more than half in the first six months of 2025 to less than $1 billion, CBRE reported.

“This slowdown was largely the result of delayed decision-making by investors due to economic uncertainty, geopolitical conflicts and power supply challenges,” the brokerage stated.

Companies including Microsoft and Amazon Web Services have paused or slowed their data center growth this year, while other large operators continue to expand.

Despite the constraints, demand remains strong, said Kristin Hammond, a CBRE senior vice president and broker based in Portland.

“The infrastructure has now been outpaced by the construction of facilities,” she said. “There’s no use to having the facility if you don’t have the power poles to service it.”

Hillsboro, along with big cloud-computing players in the Prineville area and The Dalles, remains the epicenter of the Oregon data center boom, Hammond said.

Hillsboro’s data centers had an almost nonexistent 0.2 percent vacancy rate in the first half of the year, the lowest in the nation for a major market. Rental rates averaged $150 to $155 per kilowatt per month, according to CBRE.

Net absorption in the first half of the year totaled 48.4 megawatts.

Oregon remains a popular destination for data center operators, in part due to geography, relatively cheap energy and a skilled high-tech construction workforce. Hillsboro had 475.4 megawatts of data center inventory, making it the seventh-largest market in the country, according to CBRE data. Northern Virginia remains by far the nation’s largest data center market.

Increasingly, Oregon subcontractors are being sought for data center projects in other states, said Gabe Fox, chief estimator for Mortenson in Portland.

“We have a really strong labor force that’s highly technical, which is not always the same in other markets,” he said. “We have some of the best sheet metal companies and electrical companies here in the Northwest. These companies are being sought after to bring their expertise. … They’re definitely staying busy.”

In addition to contractors’ abilities to build high-tech projects, Portland General Electric‘s experience powering semiconductor facilities has given it a leg up in providing electricity to data centers, Hammond said.

“PGE has been very savvy about it,” she said.

PGE is seeking additional energy sources to alleviate the power crunch. The company in 2023 issued a request for proposals for new power sources. Then in September 2024, PGE recommended a list of chosen projects to the Oregon Public Utility Commission. PGE is now working with the bidders to update their pricing following the passage of the federal budget bill.

PGE plans to finalize contracts this year, with projects expected to come into service by the end of 2027, the utility disclosed in July.

PGE CEO and President Maria Pope told investors during a July 25 call that the company is “seeing sustained growth from data center and high-tech customers – over 16 percent compared to the same quarter last year.”

PGE locks in long-term contracts of 10 years or more with data center customers, which allows the utility to better securitize and finance its operations, Pope said.

Nationally, CBRE found data center vacancy dropped to 1.6 percent, a record low.

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