Growth, Change and Uncertainty
As we head into 2025, a number of market trends, anticipated adjustments in policy, geopolitical uncertainties and other factors are raising many questions about how this year will play out in the construction industry.
Breaking down some of the headlines, the following are a few insights on what to expect and how building owners and contractors can best navigate the challenges and opportunities that lie ahead.
The Market
Driven by significant gains in data centers, healthcare and manufacturing, 2024 was a strong year for U.S non-residential construction, with a 7% increase in overall construction spending, as compared to 2023.
At the start of 2025, a number of factors are anticipated to help drive construction including declining interest rates, easing regulatory compliance and government incentivized programs like the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA), and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act.
Construction firms are optimistic with 75% predicting solid growth, according to a recent
ConstructionConnect survey.
While the economic forecasters also predict that the U.S. non-residential construction market will continue growing this year, it is likely to be at a slower pace of 2%.
Tapping Efficiencies
After continuously rising since 2022, the pendulum is finally swinging back with the U.S Federal Reserve passing three interest rate cuts in 2024. The good news for the industry is it’s becoming easier to secure loans to invest in construction project.
At the same time, material prices remain high, the skilled labor shortage persists and product lead times are still quite long.
The upshot is project times must continue looking for efficiencies in their project delivery methodology and construction strategies. For example, design build and integrated project delivery (IPD) will likely see an uptick.
With design-build, the full project team works together in a more collaborative manner with a single contract and single source of responsibility driving the team towards the same goal. In this setting, professionals are optimally positioned to share their expertise and find optimal solutions for the challenges that every design project brings.
In a similar vein, IPD supports collaboration, team building and transparency, with team members setting at the table at a project’s onset. IPD project inevitably create a collaborative culture where everyone is on the same team with the same goals.
In addition to embracing advantageous project delivery methods, project teams are expected to lean more into modular construction in 2025. With offsite fabrication, quality increases, construction waste is reduced, and on-site labor decreases as systems arrive at the jobsite ready to be erected. Modular construction also mitigates risks associated with weather and site constraints.
Mitigating Risks
Given this increase in uncertainties moving forward for owners and contractors, it is more important than ever to focus on mitigating risk.
There are a number of strategies companies can employ. These include diversifying supply chain sources, utilizing advanced project management tools, boosting education and recruitment, and better leveraging technology on the jobsite.
- Supply chain strategies – To help mitigate these challenges, contractors can establish alternate sourcing options and backup suppliers, and set up protocols for managing unexpected disruptions.
- Project management software – Project teams can utilize digital tools to set up detailed project schedules and timelines which account for the unexpected and proactively establish contingency plans. Enabling enhanced coordination and communication, these platforms can support the strategic allocation of resources and manpower across the full project team.
- Labor force investment – To support employee recruitment efforts and combat turnover, cross training and job rotation are sound strategies. As labors seek to gain new skills, more challenging work environments and better wages, tradespeople welcome the opportunity to develop and hone more diverse skill sets. Companies willing to make that investment will be better poised to attract and retain skilled labor.
- Leveraging technology – The integration of AI-enabled automation and digital tools on the jobsite can increase productivity and reserve manpower for higher-value tasks. By setting up robots and machines to take over repetitive and intensive jobs such as drywall installation, this enhances worker safety, reduces physical strain and frees up laborers to focus on more delicate work.
Focus on Data Centers
As one of the fastest growing market sectors, there’s a huge opportunity for data center construction moving forward. Data center projects posted a record increase of 56% year-to-date and is on track to increase 23% annually through 2030.
Cloud service providers are driving demand, along with AI, data-intensive companies like OpenAI.
In addition to securing the land, properties and funding, today’s higher densities require floor- mounted power distribution units, larger switchgear, complex power distribution systems, multiple redundant systems and miles of specialized cabling to support these unprecedented power needs.
Newer cooling technologies include liquid immersion cooling and direct-to-chip liquid cooling; in-row, in between the racks DX or chilled systems; and rear door heat exchangers.
Contractors are utilizing modularized construction and sustainable design practices to help address these unique needs.
Building Your Team
Taken together, 2025 is anticipated to be a year of continued changes and uncertainties, coupled with new opportunities. By bringing in an experienced contractor with a deep bench of knowledge and industry relationships, building owners will be best poised to build and renovate their facilities in a cost effective and timely manner.
Contact Summit Design + Build to begin exploring how we can help you on our next project.
