As the construction industry looks to 2025, a series of complex challenges could reshape its path. Talent loss and recruitment struggles are at the forefront as labor shortages continue to pressure project timelines and profitability.

 

At the same time, supply chain disruptions and macroeconomic headwinds are forcing companies to rethink their operational strategies. Amid these concerns, there are growth opportunities that can help businesses navigate these challenges and be successful in the coming years.

 

“Going into 2025 and beyond, long-term planning will be essential,” explains Chris O’Hala, director of construction and energy risk engineering at The Hartford. “Changing business conditions should prompt construction leaders to better evaluate their firm’s culture, expand markets, adopt innovation, upskill workers and even streamline succession planning.”

 

Here are the top five trends that could drive those decisions for construction firms in the coming year.

 

The Federal Reserve’s Fall 2024 restart of interest rate cuts was one piece of good news that could reverse predictions for a significantly slower 2025, says Clare Wydeven, regional vice president of construction (east) at The Hartford.

 

“Impacts won’t be felt immediately, but the Fed’s initial 50-basis-point cut on September 18 should increase demand for more projects,” Wydeven says. “As the likely start of broader easing, we should see more construction activity.”

 

Before the Fed made its move, the American Institute of Architects (AIA) forecast at midyear that spending on nonresidential buildings would close 2024 with a 7% gain, but continued weakness in commercial property values and design needs would likely slow that growth to only 2% in 2025.¹

 

Yet nationwide hiring has also remained surprisingly strong, with construction jobs gaining significantly going into the fourth quarter.²

 

Wydeven adds: “We did see some firms readjusting staffing models earlier in the year from peak levels, but now we’ll be watching to see if a potential turnaround in project activity convinces firms to focus more on training, upskilling and efficiency gains that will position them well in 2025 and beyond.”

No matter how hiring performs in the coming months, reports say close to 40% of U.S. construction industry employees are headed for retirement by 2035.³ Wydeven and O’Hala stress that all construction leaders – regardless of company size – are now in a crucial moment to examine and redefine employee roles and develop better ways to recruit, retain and upskill their talent.

 

“It’s always been the case that construction companies that invest in training and automation are better positioned for success,” says Wydeven. “What’s different about the future hiring environment is how difficult the potential loss of talent and senior-level expertise remains. Organizations need to plan ahead at this very moment.”

 

Wydeven and O’Hala suggest leaders consider these tactics:

 

Create opportunities for peer-to-peer knowledge transfer: These programs offer an opportunity for experienced workers to share career and technical experience with newer employees – and vice versa. “This may be done through a mentorship program. The formality of this program will depend on your organization’s resources and needs,” says O’Hala.

 

Envision new advancement opportunities for all current roles: Recognition and advancement programs can highlight critical workers at all seniority levels who have demonstrated a continuous improvement mindset at work.

 

Promote trade careers in communities and schools: Recent data shows that economic outcomes for young people without college degrees are improving.⁴ Wydeven notes that construction leaders can take the same approach. “Consider reaching out to high schools, even college campuses,” she says. “One of the best icebreakers with any young audience these days is to mention that trade workers typically go from training to job without any school debt.”

 

Invest in internal training to upskill current staff and attract future talent:  “With talent being hard to come by in today’s market, it’s essential to train and retain the people you have,” says O’Hala. “This will also make your organization sought after by job-seekers. Work with internal and external partners to structure a training program for your people to build these skills.”

 

Develop your work culture with emphasis on wellness and safety programs: Paying attention to safety and health issues not only protects quality trade workers, but it also builds a company’s reputation as a quality employer. “A culture of caring also helps retain workers and attract quality talent.” Wydeven adds. “Firms that promote safety and wellness will also be efficient, and efficiency equals profitability.”

While critical supply chain disruptions that began in 2020 have eased, construction companies are still experiencing the long-term effects of product shortages, price increases and ongoing global sourcing issues for raw materials. Recent numbers from Associated Builders and Contractors show that prices began moving upward in the late summer months.⁵

 

“One of the lasting lessons of the pandemic-era supply chain crisis is how critical investments in supply chain procedure will be in the future,” says O’Hala. “In addition to tracking and pricing, leaders will need to keep a much closer eye on how geopolitical, climate-driven and cyber events can potentially derail deliveries that put projects at risk.”

 

Cyberattacks, supply chain disruptions, worker or third-party injuries, and equipment breakdown or theft are just a few of the serious business risks new construction technologies can help mitigate.

 

But it’s not just about prevention, Wydeven points out. “Technology investments can facilitate growth.”

 

“For an industry that has been historically slow in adopting technology solutions, we’re seeing a changing mindset among leaders who want to transform their businesses,” she says. “And it’s not just among large players. We are seeing the emergence of affordable technology solutions that build and design, improve logistics, communication, and quality, and help ensure safer, on-time project delivery.”

 

Going into 2025, leaders should pay close attention to how technologies can enhance business operations. “Companies might want to adjust their staffing and task accountabilities to accommodate that,” says O’Hala. “Regardless of business size, leaders should consider appointing a leader who is responsible for creating and regularly updating a company-wide technology plan with specific long- and short-term goals, ensuring buy-in,” he explains.

 

Wydeven adds that technology investment yields benefit beyond immediate project management. “Adopting a focus on innovation also makes companies more attractive to workers with the latest digital skills who have never considered the construction industry before. In turn, these new hires can help upskill the experienced workers companies never want to lose. They can teach each other.”

 

Nuclear verdicts – courtroom judgments for plaintiffs of $10 million or more – continue to proliferate and affect construction companies large and small. Such suits typically focus on construction site body injury claims, on-site property damage and other potentially costly timeline or project risks.

 

“We’ve found that more claimants are hiring attorneys earlier and more frequently,” Wydeven explains. “That potentially leads to higher litigation rates, which extends the time needed to resolve claims, pushing claims costs higher,” says Wydeven.

 

Many of the trends mentioned above for 2025 factor into this increasingly risky litigation picture, adds O’Hala. Shortened project completion dates, project financing gaps, material delays or substitutions and the continued struggle to find skilled labor can all lead to worker injury and quality issues that put contractors at risk of large losses.

 

Both Wydeven and O’Hala believe construction leaders are at a unique moment to reset the way they plan, hire and evaluate future risk.

Therefore, they should consider using this time to evaluate strategy and resources for the years to come, says O’Hala. “Talent sourcing and retention, succession planning, training and upskilling market diversification and decision-making routed in data fed by technology are all considerations that must be accounted for. A firm’s risk profile and future aspirations should be at the center of this process.”