In the Know Chad Dillard: The Rebound of Non-Residential Construction
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Nov 26, 2025 Chad Dillard, a Senior U.S. machinery & electricals analyst at Bernstein Research, dives into the intricacies of non-residential construction. He discusses the current recession in the sector and predicts a rebound driven by fiscal incentives and advancements in technology. Chad highlights key growth areas like infrastructure and data centers while addressing the challenges of power supply and renewables. He also shares insights into how AI is enhancing efficiency in construction equipment, revealing trends that signal a positive shift in the market.
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Hidden Recession In Non‑Residential Construction
- Non-residential construction has been in a hidden recession, down roughly 15% ex-secular growth areas since 2023.
- That decline aligns with a typical 40-year peak-to-trough construction recession, suggesting we're at the bottom looking up.
Tax Rule Creates A Factory Build Deadline
- Bonus depreciation and the new 'qualified productive property' rule materially boost factory capex incentives through 2029.
- That creates a timing imperative for factory construction to start in 2026–early 2027 to capture year-one depreciation benefits.
Secular Forces Will Propel A 2026 Rebound
- Secular drivers (infrastructure, manufacturing, data centers, grid, renewables) should lift non-residential spending into mid-single-digit growth by 2026.
- Cyclical, interest-rate sensitive markets may lag and likely rebound around 2027, smoothing the recovery.