Looking ahead to 2025 and beyond, the construction industry faces both challenges and opportunities for growth in the coming year.
This article explores upcoming legislative changes, industry trends, and tips for setting and keeping corporate and personal goals to prepare for the future.
Mixed Projections for 2025
Depending on who you ask about the overall industry landscape, you will likely hear different projections, ranging from a possible recession to continued optimism with strong backlogs and no slowdown in sight. These views reflect challenges like rising labor costs, skilled worker shortages (although easing), interest rate uncertainty, and limited financing.
Legislative tailwinds from the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the Creating Helpful Incentives to Produce Semiconductors Act also drive demand in sectors such as manufacturing facilities, data centers, and infrastructure.1
“Through it all, the outlook for construction spending looks positive,” stated Anirban Basu, CFMA’s Economic Advisor and Chairman and CEO of Sage Policy Group, Inc., in CFMA’s June 2024 CONFINDEX report. “With megaprojects associated with manufacturing facilities, data centers, and infrastructure still apparent, overall spending is on the rise. For contractors associated with these projects, the outlook remains bright, with the greatest challenges revolving around satisfying contractual obligations. But for those in regions or segments lacking megaproject impetus, the general outlook is not nearly as bright.”2
To further highlight the varying degrees to which sectors and regions are receiving private and public investments, the White House publishes regularly updated maps of ongoing projects.3
Changing Trends to Watch
For contractors, the macroeconomic factors expected to shape the coming year are due to the following policy and cultural shifts.
Population Growth & Urbanization
The global population is expected to surpass 8.1 billion by 2025,4 driving the need for more housing units, especially in urban centers. At the same time, urban migration continues to fuel demand for residential construction.
Government Incentives
Various government initiatives, including tax incentives and affordable housing programs, support residential construction by increasing the supply of housing available.
State-level advocates work to secure funding for public education, infrastructure, and essential services.
Compliance with the IRA will continue to be critical for many contractors, especially the prevailing wage requirements.5 Companies will need to allocate the necessary resources to comply with these reporting requirements or run the risk of noncompliance, which brings significant consequences.
Shift in Remote Work Trends
The continued rise of remote work in 2023 prompted individuals to seek larger living spaces outside urban cores, sustaining demand for suburban and rural housing.6 However, many companies are now having employees return to the office, ranging from the expectation of being in the office every day to a hybrid schedule.
Most contractors expect office personnel onsite, with remote exceptions for select roles.
Health Care & Education Investments
The modernization of health care facilities and educational institutions drive construction in these sectors. In particular, aging populations and ongoing public health challenges necessitate investment in health care construction.
Technology & Data Centers
Increasing reliance on digital infrastructure necessitates the construction of data centers and technology hubs.
Supply Chain Stress & Labor Constraints
Supply chain stress has receded, but geopolitical tensions remain. Meanwhile, labor constraints persist, making it difficult to fill open positions and resulting in extended project timelines.
Green Building & Sustainability
Companies are adopting ecofriendly practices, using green building materials and energy-efficient technologies.
The Association of General Contractors of America (AGC) offers a playbook and toolkit to outline sustainability as an industry priority, along with strategies to be at the forefront of this topic.7