The difficulty in finding and retaining skilled workers continues to hamper productivity and project timelines.

Labor Shortages: A Lingering Crisis The top concern—labor shortages—reflects a systemic problem years in the making. An aging workforce is retiring faster than new workers can be recruited and trained. Some projects are in remote locations where housing and amenities are limited, making it tougher to attract talent. Unlike sectors that can adopt hybrid or fully remote work arrangements, construction remains tied to the job site. This dynamic not only limits flexibility but also makes it harder for younger professionals to learn from veteran workers, as mentorship and skill transfer are more challenging at a distance.

Rising costs for essential components have squeezed margins and complicated long-term planning

While not as severe as during the height of the pandemic, unpredictable supplies of key materials and equipment remain a significant hurdle.

Cost Pressures and Supply Chain Risks Inflation remains stubbornly high for certain materials, and while interest rates have recently dipped, long-term financing costs may stay elevated. According to Simonson, even if inflation stabilizes, mortgage rates and other long-term borrowing costs could remain in the 6% to 7% range, exerting downward pressure on certain types of construction projects. Supply chain issues, though improved, still loom large. Certain items—like large generators and specialized electrical components—remain hard to source reliably. Unexpected disruptions, from low river levels to plant shutdowns, can create ripple effects that delay projects and increase costs.

Data centers are expanding as companies invest in digital infrastructure, manufacturing plants are benefiting from reshoring and advanced production needs, and renewable energy projects continue to proliferate, driven by government incentives and market demand.

Infrastructure also stands out as a bright spot. Highways, transportation projects, and water/wastewater systems are expected to see sustained investment. This shift may help offset weaknesses in traditionally strong categories like multifamily housing and office construction, which have struggled under changing work patterns, demographic shifts, and lingering uncertainty

AI and the government spending on infrastructure is what keeping the construction industry afloat. Office and residential construction have just taking a beating. Hard for the sector to earn a profit on such projects.