2026 Outlook for the Green Industry

Volume 20, Issue 2
February 2026

Contributed by Dr. Charlie Hall, Texas A&M University

As we enter 2026, the green industry finds itself navigating a period of measured optimism tempered by persistent structural challenges. While 2025 brought uncertainty to the green industry marketplace, the year ahead presents opportunities for firms that have successfully adapted to these new market realities and positioned themselves strategically for sustainable growth.

The macroeconomic backdrop heading into 2026 provides cautious grounds for optimism. The Federal Reserve appears poised to continue its gradual easing cycle, with projections suggesting two additional 25 basis point rate cuts this year, bringing the federal funds rate to the 3.00%-3.25% range. This more accommodative monetary policy should provide relief to capital-intensive green industry operations, particularly those in landscape services and wholesale nursery production that have been hampered by elevated financing costs. However, mortgage rates are expected to remain around 6.14% by year-end, which means the housing market recovery—so critical to landscape installation and retail garden center traffic—will likely be gradual rather than explosive.

Economic Growth and Labor Market Conditions

Real GDP growth is forecast to reach a little over 2% in 2026, supported by fiscal stimulus from recent tax legislation and improving labor productivity. The unemployment rate should stabilize near 4.5%, suggesting a labor market that remains tight but not overheated. For green industry firms, this presents a double-edged sword: consumer spending capacity should remain reasonably healthy, but competition for skilled workers will persist. The structural shifts in labor markets that we have been discussing for several years—baby boomer retirements, pandemic-induced career revaluations, and workforce participation challenges—have settled but show no signs of reversing.

Input Costs and Pricing Pressures

Input cost pressures will likely remain elevated this year compared to pre-pandemic norms. The USDA Prices Paid by Growers Index suggests that fertilizer and chemical costs have stabilized but have not retreated to historical levels. Fuel costs should remain manageable barring geopolitical disruptions. Given the expected 3% increase in the index, the key for green industry firms will be maintaining pricing discipline while clearly articulating value propositions to customers who have become more price-sensitive than they were during the pandemic period.

Landscape Services

From a sector-specific perspective, the landscape services segment should remain the industry's bright spot in 2026. Latent housing demand, coupled with gradually declining interest rates, will drive both new installation projects and ongoing maintenance contracts. Commercial landscape services, in particular, appear well-positioned as companies continue investing in beautification to attract workers back to offices. Municipal green infrastructure projects, supported by federal programs, should provide steady work for specialized firms. Healthcare facilities and senior living communities are increasingly prioritizing therapeutic landscapes, creating niche opportunities for forward-thinking operators.

Nursery and Greenhouses

The production nursery and greenhouse sector faces a more mixed outlook. While supply chain reliability has markedly improved—a welcome change from the chaos of 2021-2023—demand patterns remain uneven. The inventory build-up that occurred during pandemic-era disruptions will continue to work through the system, potentially creating oversupply situations for certain plant materials, particularly in longer-term crops like trees and large shrubs. This bull-whip effect means that successful growers will need to be even more strategic about production planning and stock keeping unit rationalization.

Those growers who invested in production automation during recent years of uncertainty will find themselves with distinct competitive advantages as labor costs continue climbing faster than general inflation. The data shows agricultural wages have increased roughly 35% since 2019, nearly double the 18% increase in non-agricultural wages over the same period. Smart automation investments—whether in potting lines, irrigation systems, or spacing equipment—increasingly appear not as optional upgrades but as necessities for maintaining profitability.

Retail Garden Centers

The retail garden center segment will continue to experience bifurcation in 2026. Box stores will maintain their volume focus with exclusive live goods programs and refined fulfillment strategies, while independent garden centers must differentiate through experiential retail, specialized product mixes and expert customer service. The garden centers thriving in this environment are those offering workshops, design consultations and community events that create customer loyalty beyond mere price considerations. Digital integration will be critical, whether through online ordering, enhanced customer relationship management systems or social media engagement.

Financial and Operational Drivers Shaping the Industry

Technology adoption across the green industry should accelerate in 2026 beyond what we witnessed last year. Artificial intelligence applications are moving from experimental to essential, particularly in customer service, inventory management and demand forecasting. Robotic solutions for lawn maintenance and automated irrigation systems are transitioning from novelty to necessity for commercial landscape operators. Digital plant health monitoring systems are helping growers reduce losses and optimize production schedules with greater precision than traditional methods allowed.

Environmental considerations will continue reshaping market dynamics in 2026. Extended drought conditions in traditionally temperate regions are forcing wholesale shifts in plant selection and landscape design philosophy. Native plant production has not kept pace with surging demand, creating premium pricing opportunities for prepared growers who invested early in these categories. Water-wise landscaping has evolved from regional niche to national imperative, fundamentally changing consumer expectations and regulatory frameworks in many markets.Supply chain considerations remain important but less acute than in recent years. The pervasive logistics challenges that hampered operations through 2023 have largely been resolved, though input costs remain elevated. De-risking strategies—including re-shoring, nearshoring and more intensive strategic partnering relationships—continue to be implemented across the supply chain. The new administration's trade policies have created a great deal of uncertainty, particularly around tariffs on imported containers, growing media components, and specialized equipment. Green industry firms should maintain supply chain flexibility and develop robust domestic sourcing relationships as competitive advantages.

The working capital situation across the green industry remains mixed. Firms that wisely deployed pandemic-relief funds—whether to pay down debt, invest in productivity-enhancing capital expenditures, or build strategic inventory—are generally in stronger positions than those that did not. However, earnings before interest, taxes, depreciation and amortization (EBITDA) margins have compressed slightly for most operators as volume growth has not kept pace with input cost increases. Financial performance in 2026 will increasingly separate firms that have achieved operational excellence from those still operating on outdated models.

Merger and acquisition activity should continue in 2026, though perhaps at a slightly moderated pace compared to 2023-2025. The industry is experiencing ongoing consolidation, particularly in retail and landscape services, as successful operators expand geographic footprints and acquire talent and customer bases. However, there appears to be less private equity and venture capital interest than we saw a couple of years ago, suggesting that acquirers are being more selective and valuations more realistic.

Strategic Planning for 2026

Looking ahead, the green industry enters 2026 with a foundation built on technology adoption, workforce development and increasingly sustainable practices. The firms that will thrive are those that have moved beyond merely reacting to disruptions and are instead proactively positioning themselves for the structural changes reshaping our industry. Success will require continued adaptation, strategic innovation, sustained investment in people and technology, and an unwavering focus on delivering—and clearly articulating—value in an increasingly competitive marketplace.

While 2026 may not deliver the robust growth rates some hope for, it should offer opportunities for well-managed firms to strengthen market positions and build competitive advantages. The key, as always, will be maintaining strategic discipline while remaining flexible enough to capitalize on emerging opportunities as they develop.

Editor: Chris Laughton
Contributors: Dr. Charlie Hall, Texas A&M University

View previous editions of the KEP

Farm Credit East Disclaimer: The information provided in this communication/newsletter is not intended to be investment, tax, or legal advice and should not be relied upon by recipients for such purposes. Farm Credit East does not make any representation or warranty regarding the content, and disclaims any responsibility for the information, materials, third-party opinions, and data included in this report. In no event will Farm Credit East be liable for any decision made or actions taken by any person or persons relying on the information contained in this report.

2026 Green Industry Outlook Webinar

Monday, February 23, 2026

12:00 PM - 1:00 PM EST

Join Farm Credit East, Horizon Farm Credit and Texas A&M's Dr. Charlie Hall for a review of the green industry's operational and financial performance in 2025 and an outlook for 2026. Topics include the growth pattern of the economy, supply chain, labor availability, input cost increases, inflationary pressures and consumer spending.

Tags: outlook, ag retail, greenhouse, nursery