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Q4 2025
Construction Market Update
This quarterly spotlight provides an in-depth analysis of current trends, capital spend and industry outlook.
Three Takeaways
1.
The U.S. power sector is poised for $1.4 trillion in investment by 2030, but interconnection challenges and permitting hurdles are slowing momentum.
2.
Water availability is becoming a critical constraint for energy-intensive campuses, requiring integrated, site-wide planning early in the project life cycle.
3.
As labor demand grows, ongoing shortages in electrical and mechanical trades across key regions are making proactive workforce planning essential to staying on schedule.
J. Brett Williams
President
Construction
Jump to
Construction Trends
Tariffs Begin to Reshape U.S. Trade
Tariffs Impacting Construction
Data-Driven Demand
Is Reshaping the
Construction
Industry
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Breaking Ground in a Bottleneck Economy
We are witnessing one of the most dynamic moments in modern construction history. A surge in megaprojects and data infrastructure and power generation projects is reshaping our industries — and the pace is accelerating. This isn’t a typical growth cycle. It’s a fundamental shift driven by new technologies and an urgent need to modernize our energy backbone.
From semiconductor fabrication plants to data centers supporting artificial intelligence to mega-scale generation, this boom spans several corners of critical infrastructure. The scale and speed of this transformation require a unified, all-hands-on-deck approach among private industry, skilled labor and the federal government.
The challenges are large. If our nation is to capitalize on this moment, the government cannot afford extensive shutdowns. Progress depends on functioning regulatory agencies, predictable permitting and stable federal funding streams.
Amid this opportunity, we face a persistent challenge: a shortage of skilled workers. The demand for craft labor, engineering talent and project management experience exceeds supply. Meeting this moment will require continued innovation in construction delivery and technology.
In this edition of the Construction Market Update, our team tells us what developments are taking place across the building industry and within the government to address some of these challenges. Those of us in the industry won’t be able to hire our way out of this. The solutions will require creative approaches, some of which are emerging as we speak and others that are yet to be developed.
Round out the year with our Construction Market Update to learn where we are headed.
Live Safer,
Brett
Tariff Effects
12.4%
Increase in prices for steel mill products
37%
Drop in imports from China
$31B
Paid in customs duties (October 2025)
Construction Trends
As the year wraps up, most of the trends in construction spending remain consistent with what we’ve seen throughout the year:
- Nonresidential construction has been largely flat, with sectors like power, highway and streets, commercial and healthcare holding steady or dipping slightly.
- Growth has been modest in water, sewer and waste, and transportation terminals.
- Office and warehousing continue to decline, though recent activity suggests they may be stabilizing.
- Data centers remain the clear outlier. Construction has climbed to a $41 billion annual rate, up from $36 billion at the start of the year. Given the massive capex spending from major tech firms, even this figure may understate true activity.
- Construction spending tied to the manufacturing of computers and electronics, including semiconductors, batteries and solar panels, has fallen 12.6% year to date, driving an overall pullback in manufacturing. Still, the current $219 billion annual rate remains historically high.
Construction starts have been higher this year. According to Dodge, nonbuilding starts from January through October are up 19.8% over the same period in 2024, driven by power, water and sewer, and the broad "miscellaneous" category (pipelines, runways, stadiums and more). Nonresidential building starts are up 5.6% year to date, fueled largely by data centers.
The challenge is that much of this growth is concentrated in a limited number of megaprojects — particularly data centers and liquefied natural gas projects. If momentum in these areas eases, the industry’s overall expansion could soften quickly.
Tariffs Begin to Reshape U.S. Trade
After sharp spikes in January and March, imports of goods to the U.S. have fallen but remain at similar levels to last year. Tariffs haven't meaningfully reduced overall imports, but they are redrawing the map of where goods come from (see graph below).
The most dramatic change is with China. Chinese imports fell 37% over the past year, dropping from $39 billion to $25 billion (August 2024-August 2025, U.S. Census Bureau). With the U.S. and China agreeing to lower tariff rates, the question now is whether Chinese imports rebound or whether sourcing patterns have fundamentally shifted.
Other major trading partners are seeing declines too. Imports are down from Canada (-11%), Germany (-17%) and Ireland (-45%). Ireland's plunge is largely tied to pharmaceuticals, following stockpiling by U.S. companies earlier in the year.
Imports have increased from Mexico (+3%), Vietnam (+38%) and Taiwan (+50%). Taiwan and Vietnam have benefited from the tariffs, with the U.S. importing more computer and electronics components from those countries instead of China.
Mexico and Canada have been less impacted than initially expected because the United States-Mexico-Canada Agreement applies to such a wide range of goods. Auto-exporting nations like Japan and South Korea have been more impacted, while countries specializing in smartphones, computers and other electronics have been largely insulated due to tariff exemptions on those products.
Duties collected on imports are reaching levels that could influence the broader economy. Customs duties rose to $31 billion in October, up from $7 billion in October 2024 (U.S. Treasury). For perspective, $31 billion is around a quarter of the Social Security taxes collected in the same month.
Tariffs Impacting Construction
Tariffs are affecting the construction market, both increasing project costs and contributing to general uncertainty. ConstructConnect's Project Stress Index showed a huge spike in project abandonments in June and July, and abandonments have remained elevated for most of 2025.
Prices for inputs for nonresidential construction have risen 3.8% over the last 12 months, with the biggest increases in steel, copper and aluminum. Producer price indexes for copper and steel decreased in September; however, over the last 12 months, copper wire and cable prices have increased by 9.1%, steel mill products by 12.4%, and aluminum mill shapes by 26% (U.S. Bureau of Labor Statistics).
The construction industry is the largest user of steel and copper, and a significant user of aluminum as well (USGS). All three metals have a general 50% tariff rate; the copper tariff applies just to semi-finished products, such as pipes, wires, tubes and cables.
Price pressures could worsen if suppliers continue to increase prices to account for tariffs as well as higher commodity prices.
Komatsu recently announced a 4% price increase on orders for construction machinery, and Rio Tinto recently added surcharges on aluminum shipped to the U.S.
Brendan O’Brien
Director in Power
Bryan Floth
Mission Critical Projects Director
Brady Hays
Regional Practice Manager in Water
Data-Driven Demand Is Reshaping the Construction Industry
Earlier this year, President Trump declared a national energy emergency, accelerating efforts to expedite permitting for domestic energy resources and critical minerals. The announcement aligns with growing concerns around capacity, reliability and capital planning across the grid — particularly as demand for electricity is projected to increase by 50% by 2050, according to the National Electrical Manufacturers Association.
This demand surge, led by AI, data-centric facilities and onshoring of advanced manufacturing, has triggered a construction boom. It has also exposed critical gaps in power availability, water access and skilled labor. These pressures are reshaping how, where and what we build, and placing construction professionals at the forefront of some of the nation’s most urgent infrastructure challenges.
This is more than a U.S. story. Globally, electrical demand is doubling in many regions, and even as renewables grow, 80% of the world’s energy economy is still driven by fossil fuels, a number not expected to significantly change for decades.
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