Savanna Mendoza was nearly finished with a quick-service restaurant project in Central Texas, but she needed her contracted plumber to come back and button some things up. 

The plumber gave Mendoza, a commercial superintendent for Wyatt Management, vague excuses as to why he couldn’t come out, then sent another contractor in his place. The replacement told Mendoza that the original plumber got hired for a data center project.

“He kind of just left our job because it was B.S. money compared to what he was making,” Mendoza said. 

With the world's largest tech companies pouring hundreds of billions of dollars each into the artificial intelligence build-out, developers and contractors of nondata center projects are struggling to keep up.

“All the data center development, all of the other infrastructure projects, all of these are competing against each other,” said Darrell Betts, a Houston-based principal with Avison Young’s Capital Markets group. “The cost of construction is going up, the hard materials are going up, but it's the labor, too.” 

Tariffs, combined with a huge uptick in data center development, are creating bottlenecks, pushing up prices and throwing a wrench in timelines. J.P. Morgan estimates that hyperscalers like Amazon, Meta and Oracle will spend $700B on data centers in 2026 alone.

Hopes for this year to bring pricing relief, stability and predictability have been squashed, as U.S. construction input cost growth is up 9% annually and accelerating monthly. The conflict in Iran has pushed U.S. diesel prices up 74% from last year to an all-time record of $6.53 ⁠per gallon this week, according to the federal Energy Information Administration.

Inflation, in part driven by the data center boom, has also pushed the Federal Reserve to raise interest rates for the first time since 2023, impacting construction financing, which often relies on variable-rate debt.

“We were seeing relief here the last year or so, where pricing was moderating, and we weren't seeing the increases like we were before,” said Ariel Guerrero, regional manager of market intelligence for Avison Young’s central region. 

“But now, we're starting to see that trend start to reverse a bit, and the percentage increase on a year-over-year basis has started to accelerate.”

'You Got Bumped' 

Contractors and developers say the struggle is largely behind the scenes.

Price and lead-time increases have shifted the way they approach projects, requiring them to reexamine contracts and be hands-on from manufacturing to delivery. They also have to be ready to be told they've lost out to a data center.

Wyatt Management has also been impacted by unexpected delays for routine orders, Mendoza said, like a truckload of light poles from a trusted vendor.

“I'll call, and I'll say, ‘Hey, what's going on? You've never taken this long before,’” she said. “They’ll say, ‘Oh, Savanna, you got bumped. There's a data center, and they requested all these, so we sent them all over.’” 

The challenges are especially evident in Texas, which leads the country in data center development and general construction, with an estimated pipeline exceeding $50B.

Though Texas cities like Houston and Dallas are seeing consistent development and some megaprojects break ground, construction costs keep rising on pace with the rest of the country, and there’s no relief in sight. 

Construction cost increases may be best illustrated by the prices of steel and aluminum, which have faced a 50% import tariff since June 2025.

Steel prices were up 22% and aluminum was up 40% year-over-year in July. Data centers use about 1 million tons of steel each year. 

“We're a victim of our own success,” Hanover Co. Industrial Division President David Hudson said at a Bisnow event this month. “What's driving prices is wide-plane steel, the kind the data center guys really like.” 

Karsten Interior Services, a Houston-based wall, framing and ceilings subcontractor, doubled its material spend from 2024 to 2025 to keep up with demand, Director of Procurement Nora Casanova said. 

This year, prices and lead times keep rising. 

“It's been nonstop pretty much, getting letters from our manufacturers, from our distributors saying, ‘Due to the tariffs and the market conditions, we're getting a bunch of price increases and lead times affected on some of the items,’” Casanova said.

The delays are costly. Houston-based Aria Developers, a family-owned developer of multifamily and retail, carefully monitors its costs because it puts up to 40% of its own equity into its projects but borrows the rest, co-founder Aaslam Nazarali said. But it increasingly faces difficult choices to keep projects progressing.

“I could get something from somewhere else for $30K cheaper,” Nazarali said. “Well, that material comes after four months, and you're still paying interest for four months on the property. There's no work being done.” 

The Workarounds 

Karsten Interiors used to discuss material availability with vendors when it secured a contract, Casanova said. Now, those conversations are starting during the bidding process, which doesn’t guarantee it will get the materials it needs but gives it more insight and better odds.

Casanova said she’s proactively reaching out every three weeks, questioning vendors — as well as manufacturers of the raw materials for the products it will eventually need — on their expected stock and price increases for the upcoming months. 

“We're monitoring things that we weren't monitoring in the past,” Casanova said. 

Wyatt Management is revisiting its contracts to make sure they’re airtight and will retain the materials and subcontractors it needs throughout the duration of a project, Mendoza said. Developers often don’t know or care what challenges it faces but want projects completed on time, she said.

“I think as the increase in these centers happen, [developers are] starting to see that it's not just a phase. It's our reality of construction now,” Mendoza said. “We're going to have to plan that and put that in our contract, or it's going to have to be duly noted at the very beginning.”

Aria Developers has largely maintained its construction timelines, only seeing delays of up to 45 days, which Nazarali said is typical in the industry. This requires ongoing renegotiations of contracts with subcontractors and the ability to mold to new circumstances.

“It is a very fine balance where you have to renegotiate your contracts and do it in a timely manner, so it doesn't waste time, so your project doesn't get delayed,” Nazarali said.

Avison Young predicts some price relief to come from projects designed to boost domestic production, like its strategic partnership with I-One Steel to support the proposed development of its steel production facility in Texas, but that would be years from now. Initial steel production is targeted for the end of 2029. 

U.S. Steel's $2B expansion of its Arkansas plant is one of a handful of steel production projects announced over the past two years.

But while prices may moderate, they generally don’t go down, Betts said. Relief, if any, will be limited. Projects that continue being built will be the ones that can generate rents to justify the costs.

“That construction cost is going to be awarded to the ones that can afford it in their budget,” Betts said. 

Meanwhile, contractors are being left to feel the squeeze as tech giants vacuum up materials and labor in their race for AI dominance.

“I have large delays because I can't get equipment in, I can't get materials here,” Mendoza said. “Or, if a sub feels like the money isn't worth it anymore, then we’re forced to find somebody else and then hope that they're nowhere near the data center, or they don't even think about that and their focus will be here.”