Q1 construction outlook
What is just on the horizon for construction? Today we'll talk to a construction economist who has insight on what demand, cost and challenges will look like in the coming months. We'll also look at how construction companies can stay protected from cybercrime, the best ways to make software decisions and why equipment and machinery costs are rising. But first: Did construction workers stumble upon an archaeological site?
'Now is the time for a rebound in residential construction'
ConstructConnect released its 2025 Q1 Starts Forecast, which identifies potential opportunities and challenges facing the industry and anticipates performance by geography and vertical. We asked the company’s chief economist, Michael Guckes, for additional analysis on the numbers to inform your strategic planning.
What's the most important takeaway from the forecast?
In 2025, we expect a bit of a turn-around thanks to a more aggressive America First policy coming out of Washington, D.C., which will emphasize U.S. economic growth through lighter tax and regulatory burdens. Additionally, after consecutive years of contraction, we believe that now is the time for a rebound in residential construction. We also anticipate similarly shaped turnarounds in warehouses, nursing homes, miscellaneous medical and shopping/retail.
How does performance vary by geographic area?
We anticipate the strongest year-on-year growth in 2025 to occur in the Northeast (8.95%) and South (6.79%). While still growing, we anticipate far slower growth in the Midwest (2.59%) and West (2.00%).
How can construction leaders use this data for decision-making?
We provide category/vertical and geographical insights, giving them answers to questions including, “Which part of the construction economy is expected to grow the fastest in the year(s) to come?” and “Where can I expect to find the most business in the year(s) to come?" With sales resources focused on the best segments and areas of the market, firms can grow revenues faster than their peers and keep their growing work crews busy and well-paid.
We continue to stress to industry leaders that they do everything possible to retain, train and grow their talent pools. Finding quality laborers has long been a challenge in the industry and we expect that to only worsen under America’s latest immigration policies. Those firms which fall behind in maintaining their labor force will find themselves less qualified to take on tomorrow’s projects and compete.
>> Who we're following: Respyre on Instagram. Get the latest on moss-coated bioceptive concrete and explore all its applications for truly green building.
>> What we're listening to: "Lean Unleashed." Tune into the latest Enhance podcast to learn how to leverage the Lean methodology, streamline your AEC company's processes and systems and improve productivity and profitability.
>> What we're reading: NOAA's 3-month weather forecast. Plan ahead for temperature extremes and drought conditions in your area that impact schedules, sites, materials and crews.
>> What's happening soon: Catalyst 2025 - Unmasking the Future (Mar. 24-26, New Orleans). Join plumbing, heating and cooling contractors for the latest industry trends, educational sessions and networking.
>> Just for fun: Big Bear bald eagle nest cam. Check in on Jackie and Shadow as they tend their nest and their eaglets.
Cyber Crime: Contractors know risks but lack protection
A recent survey by Travelers Insurance reveals that cyber crime is the top concern of business owners across industries, including construction. Overall, 62% of respondents expressed some or quite a bit of worry about these threats. Among contractors specifically, the biggest cybersecurity fears were:
- Unauthorized access to financial accounts
- Ransomware, denial of service attacks and other tactics that make it impossible to do business
- Security breaches and hackers
Despite 80% of construction leaders saying cybersecurity protections are vital, almost as many (70%) admit they lack a breach response team and more than half (56%) don't have a cyber incident response plan in place.
Why it matters: Your data and your business may be at risk. Talk to your insurance carrier or broker about your exposure to hackers and other cyber criminals—and how you can deploy additional practices and protections. (ProfessionalRoofing.net)
>> Inventory Increase: New homes inventory reaches 17-year high
>> Sticker Shock: Construction costs outpace inflation
>> Market Movers: Multifamily and build-to-rent sectors improving
>> Highways Happening: Sunshine State plans expansions
Software Selection: 8 questions to ask before buying
Choosing the right construction and administrative software can be complicated. Here are eight considerations that will help you select the right solution for your needs:
- What processes and tasks can this solution automate or assist, and can it adapt to workflow variances?
- How does it support collaboration between relevant stakeholders, including language options and systems integration?
- Can it handle the range of projects we do and function across varied sectors?
- Will it scale with us as we grow?
- Is it compatible with systems we’ve already invested in, what integrations does it offer and can we customize it?
- Can we turn off the AI to meet “no AI” stipulations?
- Are the pricing and cost structure transparent?
- How can we measure ROI?
Why it matters: According to a Capterra survey, about 60% of small- and mid-size businesses report making a regretful software purchase in the past 18 months. You don’t want to be one of them. (Construction Executive)
Cost Concerns: Machinery and equipment price tags rise
Like many other cost inputs, prices for construction machinery and equipment are on the rise, according to the most recent data from the Associated Builders and Contractors. Figures for January show prices up 0.3% from December and 0.8% year-to-date, and a whopping 30.5% since February 2020. Three factors are propelling the growth:
- Manufacturers' traditional start-of-the-year price increases
- Demand spikes as buyers try to avoid tariff impacts
- Rising energy costs
Why it matters: If you're planning a purchase, you may need to adjust your budget. The trend will likely roll on at least through mid-year, according to construction economist Anirban Basu, thanks to continuing high demand and supply chain uncertainty. (Construction Equipment Magazine)
- Gimme shelter. Tune into this International Masonry Institute webinar and learn how to build storm shelters for residential, educational and healthcare projects. (Mar. 11)
- Stay safe. Pick up the best practices for electrical safety in SEMI's on-demand course specifically for construction workers.
- Paint the town. Study advanced exterior painting techniques and airless sprayer use and maintenance in this on-demand class from the Painting Contractors Association.
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The Level is written by Margot Lester and edited by Katie Parsons.
