Construction Outlook 2025: Adapting to Emerging Economic Adjustments and Workforce Limits
For many, this will be a year of adaptation. While the construction industry remains robust with solid employment growth and optimism for the year ahead across many sectors, there are some new and emerging challenges that will need to be considered.
The primary concern remains the persistent labor shortages…an issue that isn’t going away anytime soon. While construction employment has been rising across the country, a recent study by the Associated General Contractors of America (AGC) found that 50% of contractors are finding that it is just as hard or harder to find workers as compared to 2024, and retention is equally difficult.
Additionally, immigration policy changes and economic uncertainties – particularly with the emergence of higher tariffs – create the chance for greater market volatility. It’s an evolving environment that greatly benefits from increased collaboration, more efficient means and methods for project delivery and technology adoption.
Mitigating Impact through Communication
Collaborative project delivery approaches are not new to the industry, but the value of these contractual agreements in today’s environment are certainly accelerated. Procurement methods that build on communication play a critical role in helping firms not only deliver projects on time and on budget, but also optimize the current workforce and even adopt technology for greater efficiency and productivity.
In this emerging ecosystem, it’s important to foster a collaborative environment where the project team can work together to find solutions and plan ahead to address challenges like labor shortages and material costs. By working together, project teams can better plan for and mitigate the impacts of tariffs on projects.
More collaborative delivery methods also are foundational for improved task automation and even autonomy which can help better use existing labor resources. These more collaborative methods can also provide the foundation for project teams to work together on developing training programs and implementing new tools and processes.
“More collaborative delivery methods also are foundational for improved task automation and even autonomy which can help better use existing labor resources.”
Improving Efficiency through Automation
The strategic deployment of task automation, robotic solutions, and modular construction techniques can help insulate projects from the impacts of labor shortages and immigration policy changes.
Modular construction allows for more work to be done in a controlled, factory-like environment, improving quality and safety. It reduces waste and the need for skilled labor on-site, as components are prefabricated off-site. A recent study found that the global modular hospital market size was valued at USD 6.9 billion in 2023 and is projected to reach USD 10.38 billion by 2032. Similarly, construction robots are far more prevalent in the industry particularly for demolition. According to Mordor Intelligence, the Construction Robots Market size is estimated at USD 442.49 million in 2025, and is expected to reach USD 909.53 million by 2030, a compound annual growth rate of 15.5% across the forecast period.
While modular and prefabrication enables more efficient use of materials and better inventory management, these techniques also improve the ability to standardize and replicate designs, leading to cost savings.
Building Intelligence
AI has been a hot topic for some time now – and with good reason. AI-powered data analytics can enable project teams to better predict and simulate the potential impacts of various factors, such as material costs, labor availability, and weather, on project schedules and budgets.
These tools can be used to extract accurate material quantities from BIM models and 2D drawings, improving the accuracy of cost estimates and reducing the time required for this process. AI-powered sensors and computer vision can be used to monitor construction progress, worker productivity, and safety compliance in real-time. As well, cloud-based tools powered by AI can enable better collaboration and communication between project stakeholders, improving transparency and trust.
With proper training, AI can make the current workforce that much more powerful, driving efficiencies and sparking innovation. Data that’s more predictive allows industry professionals to better predict and simulate the potential impacts of tariffs on materials costs and availability.
The key to effectively deploying AI in construction is to focus on user-friendly interfaces, robust data management practices, and building trust in the technology among the workforce. Proper training and change management are also critical to ensuring successful AI implementation.
By looking closely at more collaborative project delivery methods, automation and AI, industry professionals can be better equipped to navigate the evolving economic and labor landscape, thereby enhancing project outcomes and sustaining a competitive advantage.
For more insights, listen to the The State of Construction webinar moderated by Jason Kunkel, Senior Practice Manager with CADD Microsystems, An ARKANCE Company, along with Ken Simonson, Chief Economist with the AGC, Thai Nguyen, Director of Innovation with Hensel Phelps and Brian Skripac, Director of Virtual Design & Construction (VDC) with the Design-Build Institute of America.
