Here is a quick summary of the construction forecast for 2025-2026, highlighting key trends and developments in various sectors of the construction industry.
Non-Residential Construction
Non-residential construction is expected to grow slowly through 2025, with no significant decline anticipated. However, certain segments within the private non-residential sector may experience downturns, while data centers and semiconductor fabrication plants are projected to see substantial growth.
Public Construction
Public construction spending has increased by 40% since the end of 2021, largely due to the $850 billion infrastructure bill passed in late 2021. However, the growth rate remains modest, showing only a 5% increase over the last year. The infrastructure bill’s timeline concludes in 2026, but some expenditures are expected to extend beyond this period.
Data Centers and Semiconductor Fabrication
Data centers represent a thriving industry, with construction expenditures rising by 45% over the past year. This growth is driven by cloud storage and artificial intelligence needs, and is expected to continue, although at a potentially slower rate.
Semiconductor fabrication plants are also experiencing significant growth. The CHIPS Act has stimulated domestic production, with major projects underway by companies like Intel, Taiwan Semiconductor Manufacturing Company (TSMC), and Samsung.
Traditional Industrial Construction
The traditional industrial construction sector, which includes manufacturing (excluding computer/electronics) and warehouses, has stabilized after peaking last spring. Activity is expected to remain relatively flat in terms of square footage, with minor increases in costs attributed to inflation and tariffs.
Office Construction
Office construction is facing challenges due to the shift towards remote work. While some companies are encouraging a return to the office, others are embracing hybrid models or maintaining remote work policies. This has led to a decline in office space demand, particularly in older buildings.
Retail Construction
Retail construction has been declining for several years, with the trend expected to continue. However, the rate of decline may slow as the most vulnerable properties have already closed.
Lodging Construction
The lodging sector is experiencing a mixed outlook. While leisure travel has rebounded strongly, business travel remains below pre-pandemic levels. New construction in this sector is expected to be minimal.
Healthcare Construction
Healthcare construction is projected to grow moderately. The aging population is driving demand for medical services, but the shift towards outpatient care is reducing the need for traditional hospital facilities.
Educational Construction
Educational construction is expected to remain stable. While K-12 enrollment is declining in many areas, some regions are still expanding. Higher education construction may see slight increases due to the need for updated facilities.
Challenges and Considerations
The construction industry faces several challenges, including:
- Economic headwinds, such as rising costs, tariffs, and supply chain struggles.
- Building code changes and stricter regulations.
- Labor shortages in the US.
- High costs of construction materials.
Despite these challenges, the overall outlook for the construction industry is not entirely negative. Global construction output is expected to increase by 2.3% in 2025 and 3.3% in 2026.
While some sectors of the construction industry may face difficulties in the coming years, others, particularly data centers and semiconductor fabrication, are poised for significant growth. The construction industry will need to adapt to changing economic conditions, technological advancements, and regulatory requirements to capitalize on emerging opportunities.
More information is available here.
Image: Pixabay.com
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