What 2025 holds for the US Engineering and Construction market

A look back at 2024

Last year, spending in the US construction industry surpassed a whopping $2 trillion. Even facing talent shortages, the employment level in this sector reached 8.3 million in July 2024 according to Deloitte. This number has been increasing at a stable rate for over a year now.

However, in 2024, the construction industry has faced a number of challenges including high interest rates and high inflation which has impacted this industry.

• High interest rates typically lead to reduced investment in large-scale projects as borrowing becomes more expensive.
• Inflation increases the cost of raw materials, like steel and concrete, making projects more expensive to execute and potentially leading to delays or cancellations.

These economic pressures have led to reduced investment in new projects, delays in ongoing construction, and increased reliance on short-term labor to maintain flexibility.

Outlook for 2025

As we look ahead to 2025, the construction sector is set to experience shifts influenced by economic conditions, government investments, and technological demands.

1. Economic Adjustments Driving Residential Projects

With interest rates projected to decrease gradually, including a 50-basis-point reduction enacted in late 2024, residential construction could see renewed momentum. Lower mortgage rates are expected to increase demand for housing projects, creating new opportunities for professionals in this field. For companies, this highlights the importance of preparing for increased activity by hiring skilled talent early on.

2. Government Investments Supporting Major Developments

Federal programs (such as the Infrastructure Investment and Jobs Act and the CHIPS Act) will continue driving growth in sectors like energy, manufacturing, and semiconductor-related construction. This is likely to create long-term demand for engineers, project managers, and technical specialists. Businesses in these areas will need to focus on hiring individuals with experience in large-scale industrial projects and the ability to work within federally regulated frameworks.

3. Growth in Data Center Construction

The increasing use of artificial intelligence and advanced computing technologies is expected to fuel demand for data centers. Companies specializing in these facilities will benefit from the need for expertise in construction projects focused on energy efficiency and specialized design.

What this means for employers: The anticipated growth across these areas means competition for top talent is likely to intensify. Organizations should focus on workforce planning, ensuring they attract and retain professionals equipped to handle new and ongoing projects efficiently.

The talent shortage

The construction industry continues to face a talent shortage, an issue that affects projects across residential, commercial, and infrastructure sectors. This challenge has far-reaching implications for businesses and shapes how companies approach hiring, workforce planning, and long-term growth strategies.

Drivers of the Talent Shortage

Aging Workforce

The industry is seeing an increasing number of retirements, with fewer younger professionals entering construction roles. This generational gap leaves many positions unfilled and disrupts the transfer of knowledge and skills.

Insufficient Skilled Training Programs

There’s a growing disconnect between education and industry needs. While construction requires specific skills in areas like project management, advanced machinery, and sustainable building techniques, many educational institutions and training programs fall short of addressing these requirements.

Shifting Demands

Technological advances, such as the integration of AI, modular construction, and sustainable practices, have created demand for new skill sets. 44% of the current skill requirements in infrastructure are expected to change over the next five years. However, the pace of change often outstrips the industry’s ability to train and upskill existing talent.

What this means for employers: Retention efforts are critical. Investing in employee development and creating clear pathways for growth can reduce turnover.

Technological Integration

The adoption of new and innovative technologies is speeding up, offering solutions to labor shortages and enhancing project delivery.

Key Developments Include:

1. 1. AI, Robotics, and Digital Twins: These technologies improve efficiency and enable real-time monitoring of construction sites. Digital twins, in particular, help predict and resolve potential issues before they escalate.
   2. Building Information Modeling (BIM): BIM enhances collaboration, precision, and resource utilization across project teams.
   3. Drones: Widely used for site surveys, safety inspections, and progress monitoring, drones reduce risk and provide valuable data.
   4. Emerging Technologies:
      • Augmented reality (AR) is enabling real-time visualization of projects on-site.
      • Generative AI is optimizing design processes by creating efficient layouts and construction methods.
      • Autonomous systems are transforming material transportation and heavy machinery operations.

These advancements are creating a demand for a tech-savvy workforce while pushing the boundaries of what construction can achieve.

What this means for employers: Adopting technologies like AI, robotics, BIM, and drones is no longer optional; it’s important to stay competitive. Employers must prepare to invest in these tools and provide training to ensure their workforce can leverage them effectively.

Furthermore, staying on top of technology will attract top talent, especially younger, tech-savvy professionals who expect modern work environments.

Financial Strategies: Managing Economic Challenges

Economic challenges in 2025 require strategic financial thinking as firms contend with inflation and rising interest rates. Larger companies are focusing on measures to remain financially resilient.

Key Approaches:

1. Strategic Divestitures and Capital Allocation: Firms are reassessing portfolios to focus on high-value projects.
2. Cost Optimization: Streamlining operations and implementing efficient resource management practices remain priorities.
3. Mergers and Acquisitions (M&A): With $38 billion in M&A deals in 2024, firms are pursuing growth through vertical and horizontal integration, diversifying offerings, and expanding their market reach.

What this means for employers: Competitive compensation and benefits will still play a significant role in securing skilled labor, but financial strategies must also prioritize operational efficiency.

Sustainability and Innovation: Building a Greener Future

Sustainability continues to take center stage in construction, with a growing emphasis on eco-friendly practices and innovation.

Key Initiatives:

1. Cost-Effective Sustainability: Automation and smart construction sites are helping companies reduce environmental impact while optimizing expenses.
2. Data-Driven Decision-Making: Investments in analytics tools allow firms to track and improve energy efficiency and sustainability metrics.
3. Innovative Construction Methods: Sustainable building materials and energy-efficient designs are becoming standard, driven by regulatory requirements and consumer demand.

What this means for employers: Eco-friendly construction practices are no longer a “nice to have.” Employers must integrate sustainability into their operations to meet regulatory standards and market expectations. This could include adopting smart construction methods, sustainable materials, and data-driven solutions for energy efficiency.

Summary

As the US construction and engineering industries face workforce challenges and growing demand for skilled professionals, having the right recruitment partner is essential. At Koda Staff, we specialize in connecting top finance and accounting talent with employers across the U.S. construction and engineering sectors.

We understand the needs of your business and the construction and engineering industries. Let us help you build a team that drives your efficiency and success in 2025 and beyond.

Contact us today to discuss how we can support your hiring needs.