The $700 billion data center build-out is repricing every other construction project

Savanna Mendoza had a punch list and no plumber: the quick-service restaurant she was finishing in Central Texas needed its contracted plumber back for a few final items, so he sent another contractor in his place. The substitute told Mendoza, a commercial superintendent for Wyatt Management, what had happened — the plumber had taken a job on a data center project where the pay was better, and he left, she said, because the money on the data center side was no comparison to what her job paid.

One departing plumber is an anecdote, but the number of plumbers running the same arithmetic is a repricing. The world's largest technology companies are each pouring hundreds of billions of dollars into the artificial intelligence build-out, and J.P. Morgan estimates that hyperscalers including Amazon, Meta and Oracle will spend $700 billion on data centers in 2026 alone. That figure usually gets read as a data center story. For everyone else it is the bid they have to beat for labor and materials, and it is not a bid they can win on price.

Darrell Betts, a Houston-based principal in Avison Young's capital markets group, describes a collision of every construction category at once — data center development, other infrastructure projects, all of them competing against each other — while construction costs, hard materials and labor all climb together. Tariffs compound the squeeze, and the result is bottlenecks, higher prices, and schedules that stop holding.

The pricing relief 2026 was supposed to bring has not arrived: U.S. construction input cost growth is running at 9% annually and accelerating month over month, while diesel hit an all-time record of $6.53 a gallon this week, up 74% from a year ago according to the federal Energy Information Administration, a move the report ties to the conflict in Iran. Ariel Guerrero, who leads market intelligence for Avison Young's central region, says the moderation of the past year is reversing and the percentage increase on a year-over-year basis has started to accelerate again.

None of it stays on the job site. Construction financing typically leans on variable-rate debt, and inflation partly driven by the data center boom helped push the Federal Reserve to raise interest rates for the first time since 2023. That repricing lengthens the refinancing wall, and it lands squarely on projects already carrying overruns into their loan covenants. A developer who underwrote a restaurant pad or a spec warehouse at last year's numbers is now paying more for labor, more for materials, more for diesel, and more for the money — four increases stacked on one pro forma before a single tenant signs.

The boom's first-order constraint has been power and water, and this publication has tracked sponsors racing to secure substations and municipal water rights ahead of the steel. Labor and materials are the second-order constraint, and they behave differently: a substation is a site-specific asset, but a pipefitter is not, and he goes where the job pays. Right now the job that pays is a hyperscaler campus with a deeper pocket and a faster draw than anything in the surrounding market.

Contractors are already adjusting, as price and lead-time increases have pushed them to reexamine contract terms and to stay hands-on from manufacturing through delivery, because a vendor's quote is no longer a schedule. They are also bracing for the call that says a crew, a truck, or a production slot went to a data center instead, and routine orders slip with the rest. Mendoza said Wyatt has absorbed unexpected delays on ordinary items, including a truckload of light poles from a vendor the firm had trusted.

The mistake available to every nondata developer right now is to treat this as weather — a squeeze that lifts when the AI capex cycle cools or a trade case resolves — because it will not lift on the timeline a construction loan allows. Data centers are the marginal bidder flexing in a labor market that cannot expand fast enough to absorb them, and trades follow money without sentiment. The developers handling it correctly are repricing pro formas now: a labor premium in the budget, an outbid contingency in the schedule, or the project goes on the shelf until the numbers clear. Waiting for relief is a bet against the $700 billion already committed for next year.

Industrial pricing has become a rents-and-scarcity trade, where the operator, the land basis and the data-center pull set the clearing price — and that same pull now sets the clearing price for construction itself, cutting two ways for industrial sponsors. A developer who already controls the land and the power connection is insulated; one building a spec shed on a fixed-price contract is not, because his subcontractor's next best offer is a hyperscaler campus. The scarcity that bid industrial land up is now bidding labor up, and the assets that clear will belong to sponsors who underwrote the drain instead of waiting it out.

Watch the fall construction starts rather than the data center headlines, because the hyperscaler pipeline is already priced into every landlord's pitch deck. The tell will be quieter: the restaurant, the apartment podium and the last-mile warehouse whose contractor comes back to the table with a number the developer cannot finance, and the equity check that decides whether the project gets repriced or dropped.