The US Construction Industry Outlook 2025

Deloitte’s 2025 Construction Outlook reported a 10% growth in nominal value added and a 12% rise in gross output in 2024, despite forecasted challenges ahead of the year.

The construction labor market also reached new milestones, with a record 8.3 million payrolled construction workers reported in July 2024, reflecting ongoing efforts to address the talent gap, even as tight lending markets and a waning project pipeline tested growth.

These developments, alongside a huge shift in the political landscape, have set the stage for a dynamic 2025, where evolving market conditions will call for measured strategies and innovative solutions from leadership in construction.

Market Overview

The residential construction market is set to rebound in 2025, marking a shift after two years of significant decline. Growth is anticipated to reach 12% in 2025, driven by both single-family and multi-family housing segments.

Factors like stabilizing inflation, declining interest rates, and persistent demand for suburban and rural housing are helping to rejuvenate the market.

What’s Driving the Change?

Several short- and long-term drivers are fueling the forecasted recovery in residential construction:

• Economic Adjustments: Declining interest rates and easing inflation are making housing developments more viable after 2024's financial pressures.
• Changing Lifestyles: Remote work trends continue to fuel suburban and rural housing demand as workers seek larger, more affordable living spaces outside urban cores.
• Demographic Shifts: Population growth and ongoing urbanization maintain a strong baseline demand for new housing units.

Key Forecast

Multi-family construction is recovering, but vacancy rates and high financing costs could present headwinds. Despite these risks, the strong project pipeline points to a brighter outlook for the residential sector.

Market Overview

The commercial construction sector is set for moderate growth in 2025, with key sub-sectors like healthcare, education, and technology driving activity. Total non-residential starts are expected to rise by 6.9%, rebounding from declines in 2024.

While overall growth remains cautious, emerging trends in sustainability, digital infrastructure, and strategic investments continue to shape the commercial landscape.

What’s Driving the Change?

• Healthcare and Education: Growing populations, public health needs, and an aging population fuel demand for modern healthcare facilities and educational buildings.
• Digital Infrastructure: The ongoing expansion of cloud computing, 5G, and AI technology underpins increased investments in data centers and tech hubs. Projects like Meta’s $10 billion data center in Louisiana exemplify this trend.
• Sustainability and Green Initiatives: Increasing adoption of energy-efficient technologies and green certifications, spurred by both policy mandates and market expectations, plays a critical role in shaping the commercial sector.

Key Forecast

• Non-residential building activity is projected to grow by 8% in 2025, supported by strong pipelines in manufacturing, healthcare, and education.
• Data centers, warehouses, and manufacturing collectively dominate the sector, with manufacturing accounting for over 27% of non-residential projects in 2024, a trend expected to persist.
• Spending on healthcare and data center projects remains a pivotal driver of growth.

While 2024 saw growth in non-residential construction spending, rising nearly 7% from the previous year, indicators suggest a slowdown heading into 2025.

Recent forecasts from the AIA Consensus Construction Forecast Panel survey from July 2024 predicted spending growth tapering to just 2% in the year 2025, reflecting mounting challenges in the market. A tight lending environment, softer commercial property values, and declining architecture firm billings are key factors shaping this outlook.

Not all sectors are equally affected. Manufacturing construction saw a remarkable 14% rise in 2024 and is expected to stabilize at high levels, while institutional projects, bolstered by educational facilities, achieved strong gains that will slow slightly in 2025.

These shifts highlight the uneven trajectory of US construction as economic pressures mount.

Labor shortages remain one of the most significant challenges facing the US construction industry, though there are signs of improvement in specific areas.

An Associated General Contractors (AGC) survey in 2024 revealed that over 90% of contractors continue to struggle to fill both skilled and salaried positions, a figure up from 80% the previous year.

This difficulty is particularly acute for specialized roles like surveyors, welders, and pipefitters, which remain the hardest skilled roles to fill.

Despite these ongoing challenges, there are encouraging developments. Employment in non-residential construction rose by nearly 4% in 2024, with 40 states reporting an increase in construction jobs, led by Alaska, Hawaii, and Nevada. Entry-level positions, such as traffic control or general labor, have been easier to fill as more individuals turn to construction roles amid broader economic shifts.

The demand for skilled labor shows no signs of slowing down, particularly with the surge in projects like data centers, manufacturing facilities, and infrastructure megaprojects. These developments, while crucial for the sector’s growth, have placed additional strain on an already stretched workforce.

In response, the industry is gradually adopting strategies to address the issue. Integrating automation and AI-enabled tools is one approach to ease the burden on workers while attracting younger talent.

Furthermore, partnerships with educational institutions and the promotion of apprenticeship programs are helping to build a more sustainable talent pipeline for the future.

Labor shortages may not disappear entirely in the near term, but incremental progress in recruitment and retention efforts offers some relief amid an evolving construction landscape.

Building Information Modelling (BIM) and Digital Twins

BIM and digital twins continue to lead the charge in enhancing construction planning and execution. By creating detailed virtual models, these technologies improve collaboration, streamline decision-making, and identify issues before they arise, reducing delays and costs.

Additionally, the integration of IoT devices and real-time data allows for better project lifecycle management, from design through to post-construction maintenance.

Robotics and Automation

Automation is making significant strides in construction. Technologies such as robotic bricklayers and autonomous vehicles are increasingly addressing labor shortages and productivity issues by performing repetitive tasks efficiently.

Furthermore, AI-driven solutions are enhancing project planning and safety, using machine learning to analyze real-time data, predict potential risks, and optimize resource allocation.

3D Printing in Construction

3D printing is revolutionizing the way building components are created, allowing for precision and reducing waste. By 2025, 3D printing is expected to play a central role in producing affordable housing and complex architectural designs.

The technology offers a cost-effective alternative that cuts down on labor expenses and material waste.

Emerging Technologies for Enhanced Productivity

Other emerging technologies like augmented reality (AR), drones, and AI-powered ERP systems are contributing to greater efficiency and safety on construction sites.

Drones are particularly useful for precise surveying and monitoring, while AR helps with design and on-site visualization. AI is also being used to enhance project workflows, improve safety measures, and support real-time decision-making.

As these technologies continue to evolve, they promise to drive further transformation in the industry, increasing productivity, reducing costs, and enabling more sustainable construction practices.

As the construction industry embraces new technologies, ERP systems are essential for businesses aiming to future-proof their operations. These systems help construction companies manage projects more efficiently, reduce risks, and improve data accuracy.

ERP acts as a catalyst for digital transformation, overcoming challenges like increased rework and the skilled labor gap. By centralizing data and automating processes, ERP platforms streamline everything from procurement to tracking financials.

In a rapidly evolving market, an ERP system that supports efficiency, scalability, and innovation is key to staying competitive.

For construction businesses looking to thrive in 2025 and beyond, ERP offers the clarity and control needed to optimize workflows and ensure smooth operations.

Access Coins helps construction companies all over the world control cash flow, save time, and reduce costs by centralizing critical data.

For more information, download the brochure or watch a Coins demo today.