The Market

In a Design-Bid-Build process, the project follows three distinct phases:

1. Design Phase – The developer hires an architect to create detailed construction documents.
2. Bidding Phase – Once the design is complete, contractors submit competitive bids, and a general contractor is selected.
3. Build Phase – The contractor constructs the project based on the architect’s plans.

Pros of DBB:

• Clear separation of responsibilities between architect and contractor.
• Competitive bidding may drive down initial construction costs.
• Well-suited for projects where design control is a top priority.

Cons of DBB:

• Longer project timelines due to the sequential nature.
• Potential for design conflicts, leading to costly change orders.
• Developers may need to manage disputes between the architect and contractor.

When DBB is a Good Fit:

Design-Bid-Build works best when the project has well-defined design requirements and developers want to compare contractor bids before selecting a builder. It’s also a strong option for projects with strict regulatory requirements or municipal approval processes that require full design completion before bidding.

Design-Build (DB): A More Integrated Approach

In a Design-Build process, the developer partners with a single entity (typically a general contractor or design-build firm) that oversees both design and construction. This integrated approach fosters collaboration, improves efficiency, and often reduces overall costs.

Pros of DB:

• Faster project completion since design and construction phases overlap.
• Greater collaboration minimizes conflicts and unexpected costs.
• A single point of accountability reduces risks for the developer.

Cons of DB:

• Less direct control over design unless expectations are clearly defined upfront.
• Requires trust in the Design-Build team’s ability to balance cost, quality, and vision.

When DB is a Good Fit:

Design-Build is ideal for developers looking to streamline project delivery, reduce risk, and compress timelines. It works especially well for complex projects, fast-track schedules, and when developers want a more collaborative, turnkey solution.

1. Interest Rates and Market Stabilization

The Federal Reserve’s recent rate cuts signal a shift toward market stability, easing financing costs and reactivating capital markets. This shift is fostering more transactions and providing greater price clarity.

While refinancing challenges persist, 2025 is expected to be a year of steady recovery, with improved conditions anticipated in 2026. Developers should carefully monitor lending conditions and take advantage of lower interest rates to secure favorable financing terms.

Additionally, a stabilized market means increased investor confidence, which could lead to greater liquidity and investment in commercial real estate projects. Those looking to refinance existing loans or fund new developments should act strategically while the window of opportunity remains open.

2. Industrial Development: Flight to Quality

Industrial real estate remains a strong sector, though rising vacancies in older properties indicate a clear shift. Tenants now seek modern Class A warehouses with energy-efficient features and higher ceilings.

In growth markets like Austin and Tampa, proximity to metro areas is crucial, driven by the expansion of e-commerce and logistics hubs. Developers should focus on incorporating state-of-the-art logistics technology, such as automated warehousing systems and sustainable building practices, to meet the evolving needs of tenants.

Last-mile distribution centers are becoming increasingly valuable, with businesses aiming to reduce delivery times and optimize supply chain efficiency. Investment in properties designed for flexible use, including cold storage and multi-tenant facilities, is also gaining traction as businesses diversify their supply chain strategies.

4. Student Housing’s Continued Growth

The student housing sector has matured, showing steady demand and strong revenue growth. Tier 1 universities remain the top investment targets, presenting opportunities for developers to engage with high-performing campuses.

With increasing enrollment and a lack of sufficient on-campus housing, private sector involvement in student housing developments is becoming more prominent. High-end student housing with amenities such as study lounges, fitness centers, and high-speed internet is particularly attractive.

Additionally, universities are forming more public-private partnerships (PPPs) to support housing initiatives, opening new doors for real estate investors. Developers who prioritize safety, convenience, and modern living experiences will have a competitive edge in this growing sector.

6. Technology and Automation in Real Estate

Smart technologies and automation are reshaping logistics, retail, and residential real estate. Developers should integrate tech-forward solutions to remain competitive, particularly in innovation-driven markets like Chicago and Austin.

The use of artificial intelligence (AI) in property management, predictive maintenance systems, and smart building technology is streamlining operations and enhancing tenant experience. Digital twins—virtual models of buildings that allow for real-time monitoring and simulations—are gaining traction, providing developers with invaluable insights for optimizing space utilization and energy efficiency.

The integration of blockchain for real estate transactions and tokenization of assets is also beginning to disrupt the industry, offering new ways to enhance security and transparency in investments.

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.

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.

3. Implement Rainwater Harvesting Systems

Rainwater harvesting systems collect and store rainwater from roofs and other surfaces. This collected water can be used for various purposes such as irrigation, cooling towers, or toilet flushing. By implementing these systems, commercial spaces can significantly reduce their demand on municipal water supplies and effectively manage stormwater runoff, contributing to water conservation efforts.

5. Incorporate Sustainable Materials

Using sustainable materials in construction and interior design is a key practice for eco-friendly commercial spaces. This involves using recycled or locally sourced materials wherever possible. Choosing low-VOC (Volatile Organic Compound) paints, adhesives, and flooring improves indoor air quality. Opting for materials with low embodied energy and long lifespans such as bamboo or recycled steel reduces the overall environmental impact of the building throughout its lifecycle.

7. Maximize Natural Light and Ventilation

Designing buildings to maximize natural light and ventilation can significantly reduce energy consumption. This involves optimizing daylighting to reduce the need for artificial lighting. Incorporating operable windows and natural ventilation strategies improves indoor air quality and reduces reliance on mechanical ventilation. Using light shelves or other daylighting technologies helps distribute natural light deeper into the building, enhancing the overall indoor environment.

It is worth noting that adaptive reuse construction does not come without challenges. Meeting current building codes, zoning regulations, and accessibility requirements often demands innovative solutions when working with an existing footprint. Environmental remediation may be required to address issues like asbestos, lead paint, outdated electrical/HVAC systems, and other hazards.

A thorough analysis of the property’s condition is critical to ensure the structural integrity can support the intended new use. Creatively retrofitting modern amenities and floor plans within the constraints of the existing layout requires careful planning and execution. And close coordination with local jurisdictions is necessary to secure permits and approvals for major renovation work.

5. Find Suitable Properties

Property Search:

• Identify Opportunities: Search for properties that align with your development goals and criteria, such as location, size, zoning, and potential for value appreciation.
• Due Diligence: Conduct thorough due diligence on prospective properties, including financial analysis, site inspections, title searches, and environmental assessments.

Negotiation and Acquisition:

• Negotiate Terms: Negotiate purchase agreements, lease agreements, or option contracts with property owners to secure control of the property.
• Close the Deal: Work with legal and financial professionals to finalize the transaction, complete legal documentation, and transfer ownership of the property.

6. Develop Your Projects

Design and Planning:

• Engage Professionals: Collaborate with architects, engineers, and design professionals to create project plans, blueprints, and renderings that align with your vision and meet regulatory requirements.
• Obtain Permits: Navigate the permitting process by submitting applications, meeting regulatory standards, and obtaining approvals from local authorities.

Construction Management:

• Hire Contractors: Select a reputable general contractor to execute the construction phase of your projects.
• Monitor Progress: Oversee construction activities, track progress, manage schedules and budgets, and address any issues or delays that may arise.

Building the Foundation

For industrial projects, tilt-up construction with a streel structure is most commonly used.

At the start of construction, it’s extremely important that the slab on grade is installed properly as this can make or break a successful, properly functioning building.

The structural engineer evaluates the concrete design strength and determines the type and quantity of reinforcing steel/rebar. The slab should also be designed to support racks in warehouse applications.

Prior to pouring the foundation, the subgrade must be properly prepared. The contractor should take into account concrete shrinkage and verify all saw cut joints per the specification prior to the pour. In addition, a laser guided screed should be used for concrete placement.

For the finished floor, a ride-on power trowel with float pans is very effective.

Guaranteed Maximum Price

With a guaranteed maximum price (GMP) contract, the maximum amount the owner will have to pay the contractor is capped. Consequently, the building owner’s risks are lowered as the general contractor takes acts as the construction manager at risk (CMAR).

The contract includes costs for labor, materials, overhead and a percentage of those costs to generate a profit. This structure makes budgeting easier and can help expedite the lending process. Project plans are often finalized before construction, so change orders are minimized.

GMP requires careful review and analysis of expenses, which can be particularly time-consuming for large, multi-phase projects. In many cases, a shared savings clause is introduced, which allows any leftover funds to be spent by the contractor should the scope be missed during contract buyout. Further, the contractor must carefully price the project or risk paying out of pocket.

Integrated Project Delivery

With large, complex projects, integrated project delivery (IPD) can be a good choice. Like design-build, both the design and contract is included in one contract.

The owner, designer and building are motivated to work closely together, often applying lean principles, as they share risk. A lump sum profit is then divided amongst the owner, designer and builder in a financially successful project.

On the downside, IPD contracts are relatively new in the industry and some contractors might find it challenging to secure funding.

Bringing Value

To ensure a high level of quality and efficiency through this whole process, another best practice is establishing internal budgets at the conception of the job. Working hand in hand with architects and engineers then helps confirm that the project is staying on budget.

As for selecting subcontractors and companies to work with, it’s important to rigorously scope subs and suppliers to build the best qualified building team and ultimately offer the best value.

Another best practice is planning and sequencing phasing and site logistics to best coordinate project activities and address any safety concerns.

And finally, before construction commences, all necessary construction permits must be obtained. If time is of the essence, contractors may benefit from the services of a permit expeditor.