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In 2024, the construction industry faced several challenges, including tight economic constraints, a skilled labor shortage, and fluctuating material costs.
Today, while the economy remains resilient, construction companies are still not entirely in the clear. Instead, those in the business have adopted a sense of cautious optimism for 2025.
Over the last year, we’ve worked with hundreds of construction firms across the U.S. and expanded our network of industry professionals. As a result, we have a unique understanding of the current market and what to expect moving forward. Keep reading for the insights.
Businesses continue to feel the strain of the construction labor shortage as baby boomers retire in droves and less talent enters the market. Unsurprisingly, 37% of firms found it difficult to hire in 2024, according to our Talent Trends report.
Over two-fifths (46%) said matching salary expectations has been their biggest hurdle. This challenge has been exacerbated by employees’ requests for higher wages, which will likely continue as top talent remains in high demand.
As professionals apply pressure for more pay, having accurate salary data is a must. Our 2025 Construction Salary Guide includes salary benchmarks for various roles, regions, and project sizes, so you can extend and negotiate offers with confidence.
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High inflation and interest rates kept buyers and lenders cautious through 2024, especially in the commercial and residential segments. In 2025, despite multiple interest rate reductions, industry economists remain unsure of future project spending, largely due to the potential impact of proposed tariffs and governmental policies.
However, construction companies can expect an increase in overall investment following moderated inflation, lower interest rates, and a clearer picture of the market.
Factors impacting material cost and availability over the next twelve months include inflation, proposed tariffs, geopolitical tensions, and increasing demands for sustainable alternatives. Companies should closely monitor these areas and prepare accordingly.
We saw high numbers in residential construction in 2021 and 2022. Over two years later, however, firms are dealing with a much more cautious market. We expect private building demand to gradually rise following the Federal Reserve’s efforts to cool inflation.
Nonresidential construction maintained a healthy activity level through 2024, with spending increasing more than 7%. While some sectors, like office building, have lost steam, others have gained momentum, including healthcare, manufacturing and data centers, which are projected to increase in 2025.
However, these trends are not identical across the U.S. Certain regions, like the South, have experienced a boom in data centers due to access to water, energy, and cheaper land. Meanwhile other areas, like the Southeast, have had an increase in residential construction to accommodate the growing population.
In the coming months, we also expect to see massive reconstruction efforts in Los Angeles following the devastating wildfires that claimed thousands of homes, businesses, and institutions in January. This rebuild could lead to tightened labor and higher material costs nationwide.
We’re seeing more construction firms integrate technology into their operations. For example, management software has proven useful for tracking profits, resource allocation, project progress, and more.
Additionally, artificial intelligence (AI) has become a popular tool in construction to automate layout processes on jobsites and offset the labor shortage. Successful AI adoption has increased productivity, accuracy, and safety. Similarly, machine learning, a subset of AI, helps teams evaluate data to predict project costs and timelines.
Other tech tools, such as drones, have demonstrated their value for monitoring material inventory and enhancing onsite surveillance from remote locations. We can only expect more reliance on technology in 2025, which will also help recruit younger, tech-proficient employees.
As certain challenges continue to test the industry, it’s important to stay in the know, whether you’re a business owner or construction professional.
If you’re looking for a new job or to hire the best talent on the market, we can help. Browse our open roles or learn more about our expertise in construction recruitment.
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