Construction Industry Insight (Winter 2025)

Construction Industry Insight (Winter 2025)

This insight focuses on a number of topics that pertain to the construction industry as a whole, including the outlook for 2025, the potential impact of Trump tariffs, the continued labor shortage, and states with the best policies and programs for construction. It also includes a summary of trends in used equipment values.

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Construction Outlook for 2025: Looking ahead to 2025, the construction industry stands at a pivotal juncture.  Despite facing a complex landscape marked by both opportunities and challenges, the sector is poised for growth.  However, several key factors and trends will shape the market.  Understanding these dynamics will be crucial for contractors seeking to navigate complexities and capitalize on opportunities.
 
Some of the more positive trends expected to shape the future of the construction industry are as follows:
 
Technological Advancements – Innovations in construction technology such as building information modeling, artificial intelligence, and robotics are enhancing efficiency and reducing costs.  These advancements will continue to shape the industry in 2025.
 
Sustainable Construction – The push for sustainability is leading to the adoption of green building practices and materials.  Modular construction and prefabrication are gaining traction, accounting for more than $82 billion of the construction market, with projections to reach $110 billion by 2025.
 
Government Support – The U.S. Infrastructure Bill is expected to continue to provide a significant boost to the construction industry, particularly in infrastructure projects.  This support, coupled with expected declines in inflation and interest rates, presents a favorable environment for construction growth.
 
At the same time, the industry will continue to have to navigate a number of challenges:
 
Economic Uncertainty – Fluctuating economic conditions, including inflation and interest rates, pose significant challenges.  In addition, the pace of economic recovery post-pandemic remains uneven across regions, affecting investment decisions.
 
Supply Chain Disruptions – Ongoing supply chain issues, exacerbated by geopolitical tensions and logistical challenges, continue to impact the availability of construction materials.  These disruptions can lead to project delays and increased costs.
 
Labor Shortages – The construction industry faces a persistent labor shortage, driven by an aging workforce and a lack of skilled labor.  This shortage can impede project timelines and increase labor costs.
 
Entering 2025, the commercial construction sector is expected to experience slower growth compared to residential construction.  However, specific sub-sectors such as healthcare, education, and data centers are anticipated to see significant investment.  With cautious optimism, the American Institute of Architects projects that spending on nonresidential buildings will grow by just over 1%.
 
By staying informed about market dynamics and leveraging technological and sustainable practices, industry professionals can position themselves for success and make informed decisions for the future.
 
Potential Impact of Trump Tariffs on U.S. Construction: As President-elect Donald Trump prepares to take office, one potential policy he has put forth could have significant implications on the construction industry; the implementation of tariffs on countries such as Mexico, Canada, and China.  As indicated below, this could affect construction projects in several ways.
 
Increased Material Costs – One of the more obvious aspects of construction to be impacted is material prices.  A tariff program would most certainly result in increased prices for commonly imported materials such as steel, aluminum, lumber, and cement.  This would not only affect the overall budget of construction projects but also lead to supply chain disruptions, causing delays and further escalating expenses.
 
Uncertainty in Project Pricing – Tariffs would likely have the greatest impact on those projects currently being estimated or in process.  These potential and uncertain costs will add complexity to the estimation process making it challenging for contractors to price projects accurately.  For projects in process, once tariffs are imposed, fluctuating costs can lead to potential budget overruns, making it difficult for construction firms to maintain profitability.  To mitigate these risks, some contractors might also resort to stockpiling materials, which can drive up costs, create storage challenges, and result in another hit to the bottom line.
 
Other Tariffs – Not much has been said about Canada, Mexico, and China developing programs that target the U.S.  Retaliatory tariffs could pull in other countries from which specialty materials are currently being imported and which may be at a premium to begin with.  This domino effect would compound and complicate the cost and access to imported construction materials and potentially slow down construction.
 
Infrastructure Projects – The need for re-investment in the country’s infrastructure has been at the forefront of the construction industry for the past decade.  While the industry is incentivized to use American-made materials, some components, raw or finished, come across our borders.  Tariffs will create an unbudgeted, undue cost that either the contractor or owner will absorb and ultimately pass down to the end user.  For those infrastructure projects that may already be struggling to move forward, they could lead to more funding challenges and greater uncertainty in the execution of these projects.
 
The construction industry is resilient and will adapt by finding alternative suppliers, investing in domestic production, and/or adjusting project timelines to navigate these challenges.  Nonetheless, there will be financial and time costs associated with these strategies.  Construction firms will have to carefully plan and manage these emerging risks to continue to be competitive and thrive.
 
Construction Labor Shortage Continues: The construction sector continues to struggle with a significant shortage of workers.  Between August 2023 and July 2024, the industry had an average of 382,000 job openings each month.  This problem is expected to intensify as the industry anticipates growth in the coming years, raising concerns about how to bridge the growing, labor gap.
 
The current labor shortfall is further complicated by the construction of data centers, semiconductor manufacturing facilities, and megaprojects that require specialized labor such as welders and electricians.  In addition, the industry is witnessing a shift in skill requirements.  For instance, 44% of the current skill requirements in infrastructure are expected to evolve over the next five years.
 
An aging workforce presents another issue, with projections indicating that, by 2030, the average age of craft workers will be 46 years.  Firms are also dealing with a perceived lack of interest among the younger generation which has different expectations when it comes to work and the working environment.  As a result, companies must reach a balance between the institutional knowledge that experienced employees bring and the new skills and perspectives of younger employees.
 
There are a number of strategies the construction industry could implement to address these issues in 2025.  These include:
 
Integrating AI-enabled Automation and Digital Tools – AI-powered technologies like robots or autonomous machines can be used in labor-intensive trades like drywall installation, thereby helping the workforce to perform more tactical jobs.  They can also help to attract younger workers to the industry while aiding the retention of older workers by reducing physical strain and enhancing safety.
 
Offering More Opportunities for Career Growth and Diversification – To combat high turnover rates, organizations can encourage cross-skilling and internal mobility through job rotation and cross-training.  The use of experiential learning tools like augmented reality and virtual reality, for example, is one way to help workers build new skills.
 
Recruiting from Outside of the Sector – Companies may also tap into alternative sources of talent, such as employees transitioning from tech and other sectors.
 
Creating Partnerships – Companies can focus on or scale up ecosystem partnerships with academia and government to help create a steady talent pool by offering apprenticeships and work-study programs.
 
Wisconsin Ranked as Top State for Construction: According to Associated Builders and Contractors (ABC), Wisconsin is the number 1 state for construction.  Since 2015, ABC has ranked all 50 states and the District of Columbia based on policies and programs that better career pathways in construction, further workforce development, and strengthen fair and open competition on taxpayer-funded construction projects.  Arkansas, Kentucky, West Virginia, and Florida rounded out the top five states in 2024, in ranking order.  “Policies and processes that protect free enterprise, promote economic growth, reduce regulatory burdens, and expand workforce development create the conditions to welcome all of the U.S. construction industry to rebuild America’s infrastructure,” said Ben Brubeck, ABC’s vice president of regulatory, labor, and state affairs.
 
Wisconsin has been a high-performing state year after year, but takes the top spot for: (1) the highest scores on fair and open competition policies prohibiting government-mandated project labor agreements, ensuring market-driven wages on public works jobs and protecting workers with its right-to-work law; (2) a sustained level of positive job growth in construction, with a five-year job growth rate of 4.4%; (3) a continued commitment to quality career and technical education, delivering a 97.4% graduation rate for students in career technical education programs and a 91.4% rate of postsecondary career and technical education students placed in careers and/or apprenticeship programs; and (4) a workforce development pipeline that delivers a construction labor supply over 100% of demand amidst a severe nationwide construction labor shortage.
 
Florida, a former first-place state, continues to perform highly across the board.  With one of the largest economies in the country and extensive labor needs, it has maintained a particular focus on innovative career-centered education opportunities.  This continues to yield positive results for craft professionals and the construction workforce as the state experiences record population growth.
 
The bottom five states, in ranking order, were Washington, the District of Columbia, Illinois, New York, and Hawaii, each receiving poor ratings for creating conditions and policies that allow merit shop contractors to thrive.  Low-performing states maintain policies unfriendly to open shop contractors and taxpayers, such as encouraging or requiring the use of government-mandated project labor agreements on state and/or local projects, including new executive actions by governors in Hawaii, Maryland, and Pennsylvania.

Trends in Used Equipment Values

According to the most recent Sandhills Global market reports, auction values for used equipment, trucks, and trailers were up overall in December auctions, reflecting a typical end-of-year trend.  However, auction values for late-model assets continue to depreciate dramatically.  Looking at the commercial truck market specifically, inventory trends continue to diverge, with day cabs remaining steady while sleeper truck inventories decline.  Both day cabs and sleepers are following similar downward value trends, with auction values and asking prices dropping.

Specific observations regarding U.S. trends related to used heavy-duty construction equipment and lifts are as follows:

U.S. Used Heavy-Duty Construction Equipment

December inventory levels for used heavy-duty construction equipment, which includes crawler excavators, dozers, and wheel loaders, dropped 1.77% month-over-month but rose 17.63% year-over-year.  Used wheel loaders had the greatest impact on both of these figures, with inventories down 3.58% month-over-month and up 31.81% year-over-year.  Asking values in this market decreased by 1.6% month-over-month and 6.55% year-over-year.  Used crawler excavators led all other categories in asking value declines, down 2.91% month-over-month and 9.29% year-over-year.  At the same time, auction values decreased by 1.68% month-over-month and 9.26% year-over-year.  The used wheel loader category showed the largest declines, down 3.23% month-over-month and 12.07% year-over-year.

U.S. Used Lifts

Inventory levels in this market continued a nearly year-long upward trend despite a 0.99% month-over-month decrease in December.  Inventory was up 19.65% from year-ago levels.  The used rough terrain scissor lift category drove these changes, with a 3.12% month-over-month decrease and a significant 42.76% year-over-year increase.  Asking values declined by 0.82% month-over-month and 11.65% year-over-year, continuing a downward trend.  The most significant changes were seen in used slab scissor lifts, down 6.94% month-over-month, and used telehandlers, down 13.86% year-over-year.  Auction values have also been trending downward, with decreases of 1.21% month-over-month and 14.96% year-over-year.  The used cushion tire forklift category exhibited the largest month-over-month auction value decrease at 11.11%, while the telescopic boom lift category showed the largest year-over-year decrease at 18.65%.

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