Construction firms are optimistic about growth in several key markets for 2025, particularly in public-sector projects, but lingering concerns over labor shortages and rising materials costs remain, according to a survey by the Associated General Contractors of America (AGC) and Sage. The survey findings, detailed in A Year in the Balance: The 2025 Construction Hiring and Business Outlook, highlight both opportunities and challenges facing the industry.
Optimism for Public-Sector and Select Private-Sector Markets
Survey results show positive net readings for 15 of 17 construction categories. Data centers lead with a net positive reading of 42%, followed by strong expectations for water and sewer projects (35%) and power infrastructure (32%). Healthcare construction also shows promise, with net positives of 27% for non-hospital facilities and 24% for hospitals.
Public infrastructure projects are another bright spot. Contractors are optimistic about transportation projects (net 29%), bridge and highway work (24%), and federal contracts (22%), driven in part by increased federal infrastructure funding.
In the private sector, manufacturing plant construction maintains a positive outlook (net 25%), while educational construction projects, including K-12 schools (13%) and higher education facilities (12%), also show growth potential.
Areas of Concern
Despite these positive trends, certain private-sector markets face significant challenges. Contractors report negative outlooks for private office construction (-3%) and retail projects (-5%). Concerns persist regarding multifamily residential (net 12%) and warehouse construction (14%), which show only modest optimism.
Labor shortages remain a critical issue, with 78% of firms struggling to fill hourly craft positions and 77% facing challenges in hiring salaried staff. Rising direct labor costs, insufficient workforce supply, and worker quality rank among contractors’ top concerns.
Materials Costs and Supply Chain Recovery
Materials prices continue to be a worry, exacerbated by potential new tariffs. While supply chain conditions are improving—nearly half of respondents reported no significant disruptions in 2024—many firms are taking proactive measures. These include accelerating purchases (41%), sourcing from alternative suppliers (32%), and specifying alternative materials (25%).
Technological Investments
To address labor and productivity challenges, construction firms are ramping up investments in technology, particularly artificial intelligence (AI). Nearly 44% of firms plan to expand AI usage, while 40% are focusing on document management software, 36% on accounting tools, and 35% on project management platforms.
Dustin Stephens, global head of construction at Sage, highlighted the transformative potential of AI: “Leading firms are leveraging advancements in AI, cloud, and mobile technologies to streamline operations and tackle complex projects.” However, cybersecurity (41%) and time for technology implementation (38%) remain significant challenges.
Policy Recommendations
Industry leaders are urging the incoming Trump administration to address labor shortages, streamline permitting, and curb materials price inflation. Key policy requests include creating temporary work visa programs tailored to construction, increasing funding for vocational training programs, and repealing President Biden’s executive order mandating project labor agreements for large federal projects.
“It will be a good year for the construction industry if the administration prioritizes policies that ease materials shortages, avoid price hikes, and expand workforce access,” said AGC CEO Jeffrey Shoaf.
With federal investment and innovation driving growth, construction firms are cautiously optimistic about navigating the challenges ahead in 2025.
