Q1 2026 produced clear winners and losers within the Building Products & Services industry.
Residential and manufacturing-related sectors struggled, while commercial construction held firm, driven by strong demand for data centers and infrastructure. Higher tariffs pushed up material costs and weighed on homebuilders and related companies. Even so, deal activity held up well, with buyers continuing to acquire businesses that offer scale or exposure to faster-growing commercial markets.
The long-term case for the industry remains solid: the country still faces a large housing shortage, building stock continues to age, and investment in digital infrastructure shows no signs of slowing.
The gap in performance across Building Products & Services sectors in Q1 2026 was unusually wide. Commercial Construction led the way, with stock returns of roughly 31% year-over-year and solid gains in the quarter as well. Companies like Fluor, AECOM, Skanska, and Jacobs benefited from heavy spending on data center construction and related infrastructure. Nonresidential construction spending hit $80.3 billion in January 2026, the highest January figure on record, with data centers making up the largest slice of that activity.1
Building Products Distribution also expanded on a quarter-over-quarter basis, reaching approximately 15.0x EV/EBITDA, as distributors were generally able to pass higher tariff costs along to customers. Building Products Manufacturing, Repair & Retail, and Residential Construction all saw multiples hold flat or contract, in line with their weaker stock performance.
Residential Construction fell roughly 7% in Q1 and remains slightly negative year-over-year. The average 30-year fixed mortgage rate stood at 6.30% as of mid-April 2026, according to Freddie Mac,2 and Fannie Mae's March Housing Forecast called for single-family housing starts to drop 6.2% year-over-year.3 Construction input costs rose at a 12.6% annualized rate in early 2026, driven in large part by tariffs on imported steel, aluminum, and copper.4 Those higher costs are squeezing builder margins and slowing the pace of new homes coming to market.
Repair & Retail was down about 6% in Q1. Demand for home repairs and remodeling continues to get a boost from an aging housing stock and from homeowners staying put rather than giving up their low mortgage rates. That provides some support, but slower consumer spending is capping any meaningful recovery. Building Products Manufacturing saw the steepest year-over-year decline, down roughly 13.5%, as companies like Owens Corning, Masco, Eagle Materials, and Carlisle absorbed the brunt of rising raw material costs.
The Dinan Building Products & Services Index† offers an additional read on how middle-market companies in the space are performing. As of mid-March 2026, the Index traded at approximately 11.4x EV/EBITDA, a bit above its Q4 2025 level of 11.3x and its year-ago level of 10.7x. That modest improvement points to steady, if quiet, valuation support in the middle market, and it tracks with the multiple gains seen in Commercial Construction and distribution at the broader sector level.
On a stock price basis, the Dinan Building Products & Services Index is up approximately 2.4% since its March 2021 inception, well behind the S&P 500's roughly 66% gain over the same stretch. In Q1 alone, the Index fell about 13 percentage points, trailing the broader market. Dinan's internal tracking points to mid-market companies facing more pressure than their larger peers, particularly from higher material costs tied to tariffs and from greater exposure to the residential sector. That pattern is consistent with what PwC and FMI have observed more broadly: larger buyers are returning to the market with confidence while smaller, mid-sized companies are working through a more difficult environment.5
Where tariff policy goes from here will have the biggest impact on this industry for the rest of 2026, as it flows directly into material costs, builder margins, and what buyers can afford to pay for a home. Companies with strong exposure to commercial construction and data centers are in a good position, backed by a U.S. project pipeline that ConstructConnect estimates at over $88 billion in near-term planned starts.8 On the residential side, any relief on tariffs or mortgage rates could release a lot of pent-up demand, given the country still faces a housing shortage of roughly 3.7 million units,9 setting up a potential rebound in both homebuilding and repair-and-remodel activity as conditions improve into 2027.
† The Dinan Building Products & Services Index is a proprietary index of publicly traded mid-market building products and services companies maintained by Dinan Capital Advisors. Index composition is available upon request.
1 IMA Financial Group. "Construction Markets in Focus Q1 2026." March 2026.
2 Freddie Mac Primary Mortgage Market Survey. April 16, 2026.
3 Fannie Mae. "March 2026 Housing Forecast." As reported by TheStreet, March 24, 2026.
4 Construction Owners Association of America. "50% Steel, Aluminum, Copper Tariffs Raise Construction Costs in 2026." April 2026.
5 PwC. "Engineering and Construction: U.S. Deals 2026 Outlook." FMI Corp. "Building Products M&A and Sector Update: February 2026."
6 Brown Gibbons Lang & Company. "Building Products M&A Poised for Growth in 2026." January 29, 2026.
7 PwC. "Engineering and Construction: U.S. Deals 2026 Outlook."
8 ConstructConnect / Equipment World. "Data Center Construction Boom to Grow in 2026." February 6, 2026.
9 Freddie Mac housing shortage estimate, as cited by KPMG Corporate Finance LLC. "Building Products and Solutions Market Perspective 2026." January 2026.