Despite ongoing economic uncertainty, the construction industry enters the second half of the decade on a solid footing, supported by sustained infrastructure investment, evolving private-sector demand, and multi-year project backlogs. From public works and energy to data center development and utilities, contractors and equipment manufacturers are navigating a market shaped by long-term opportunity alongside short-term volatility tied to financing, costs, and labor availability.
AEM President and CEO Megan Tanel joined AEM in 1995 and has held various leadership roles across the organization for decades. In her current role, Tanel sets the strategic direction and operation of all AEM programs, focusing on core service areas of market information, public policy advocacy and exhibitions.AEM
To understand more about the conditions of the industry today, Equipment Today (ET) spoke with Megan Tanel, president and CEO at the Association of Equipment Manufacturers (AEM). The following conversation explores the forces shaping the construction landscape heading into 2026, including technology adoption, workforce strategy, supply chain resilience, and regulatory pressures. Tanel offers insight into which market segments are gaining momentum, how equipment and automation are helping contractors do more with fewer resources, and what opportunities — and risks — lie ahead as the industry works to modernize, improve productivity, and deliver on an unprecedented pipeline of work.
ET: How would you describe the current overall health of the construction industry, and what indicators are driving your assessment?
The construction industry remains fundamentally strong, supported by long-term infrastructure investment, sustained demand for housing, and continued private-sector development. While short-term volatility exists, particularly related to financing conditions, the underlying indicators are positive. Backlogs remain healthy, public funding from the Infrastructure Investment and Jobs Act continues to flow into projects, and equipment demand reflects contractors preparing for multi-year work pipelines rather than short-term cycles.
ET: What major shifts within the industry have you observed over the past year?
One of the most notable shifts is the acceleration of technology adoption across jobsites. Contractors are no longer piloting digital tools, automation, or connected equipment. They are integrating them into daily operations. We have also seen a growing emphasis on workforce strategy, with companies rethinking how they attract, retain, and train talent. At the same time, supply chains have become more resilient, with manufacturers and contractors placing a higher value on transparency, flexibility, and domestic capacity.
ET: Which segments of the industry show the strongest and weakest activity heading into 2026?
Infrastructure, energy, and public works remain among the strongest segments, driven by federal and state investment. Utility construction, transportation, and broadband expansion continue to create consistent demand for equipment. Residential construction has shown more variability, particularly in interest-rate-sensitive markets, while certain commercial segments are adjusting to changing work patterns. A powerful new driver is the surge in hyperscale data center development tied to AI and cloud, where multi‑hundred‑megawatt and gigawatt‑scale projects are proliferating at unprecedented scale. Overall, the diversity of demand across sectors helps stabilize the broader industry.
ET: How are rising material costs, supply chain constraints, and interest rates affecting equipment manufacturers and contractors?
Cost pressures and higher interest rates have increased the importance of efficiency and strategic planning. Equipment manufacturers are focused on helping contractors do more with fewer resources by improving machine performance, uptime, and total cost of ownership. Contractors are being more deliberate about capital investments, prioritizing equipment that delivers productivity gains, fuel efficiency, and data-driven insights that improve jobsite decision-making.
ET: What are the most pressing labor shortage challenges contractors are facing, and how can they address workforce gaps?
The labor shortage remains one of the most significant challenges facing the industry. Contractors are competing not only with each other but with other industries for skilled workers. Addressing this requires a multi-pronged approach that includes modernizing the industry’s image, expanding access to training and apprenticeship programs, and leveraging technology to make jobsites safer and more productive. Equipment and automation play a critical role by helping crews accomplish more with smaller teams.
ET: Which emerging technologies are having the greatest impact on project efficiency and delivery?
Automation, machine control, telematics, and data-driven project management tools are delivering immediate and measurable benefits. Artificial intelligence and advanced analytics are helping contractors optimize fleet utilization, improve maintenance planning, and reduce downtime. Robotics and autonomous solutions are beginning to address labor-intensive and hazardous tasks, improving safety while increasing consistency and precision on the jobsite.
ET: How have recent regulatory changes influenced the industry and contractors’ ability to execute projects?
Regulatory requirements continue to shape how projects are planned and delivered, particularly in areas related to emissions, safety, and permitting. Clear, consistent, and achievable regulations are essential to maintaining project momentum. AEM works closely with policymakers to ensure regulations support innovation and competitiveness while recognizing the practical realities contractors face in the field.
ET: How are companies adapting their risk management, insurance strategies, or contracting methods in today’s market?
Companies are taking a more proactive approach to risk management by investing in safety technology, predictive maintenance, and real-time data visibility. These tools help reduce jobsite incidents, equipment failures, and project delays. Contracting methods are also evolving, with greater collaboration between owners, contractors, and suppliers to manage risk more effectively and deliver projects on time and on budget.
ET: What sustainability or ESG priorities are most shaping decision-making in the industry?
Sustainability is increasingly focused on practical outcomes rather than abstract commitments. Equipment manufacturers are advancing lower-emission engines, alternative fuels, electrification, and efficiency improvements that deliver real environmental benefits without sacrificing performance. Contractors are prioritizing solutions that reduce fuel consumption, extend equipment life, and support responsible resource use while maintaining productivity.
ET: Looking ahead three to five years, what are the biggest opportunities and threats for the construction sector?
The greatest opportunity lies in the industry’s ability to embrace innovation at scale. Technology interoperability workforce development, and infrastructure investment together can transform productivity and safety across construction. The biggest threat is inaction. If the industry fails to modernize, address workforce challenges, or maintain a competitive policy environment, it risks slowing progress at a time when demand for construction has never been greater. Collaboration across the industry will be essential to unlocking long-term growth and resilience.
