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EXECUTIVE SUMMARY
Despite an assumed recession for the broader U.S. economy in 2025, FMI anticipates construction and engineering spending will continue to expand albeit at a slower rate during our forecast period.
Single-family residential, the largest industry segment and one that creates demand for other types of construction, is projected to benefit from the recent rate-cutting cycle as well as anticipated political support for addressing housing affordability. Multifamily residential is projected to contract over the next several years due to the recent conclusion of a large and rapid building cycle. The residential improvements sector will continue to be challenged but will experience relief through lower borrowing rates that unlock homeowner mobility and refinancing activity.
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Most other building construction sectors are projected to be positive in 2025, supported by lasting legislation from the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and CHIPS and Science Act. However, many segments will continue to slow through 2025 and return to historically stable growth rates of 2% to 3% per year, reflecting near-term inflation expectations.
Infrastructure construction remains the brightest spot in our forecast. The incoming administration communicated ongoing policy support for the built environment, although that support differs from the previous administration. FMI expects 2025 policies will continue to support infrastructure investment while reflecting new ways to boost private capital investments. Delays or opposition to reauthorizing large parts of IIJA funding beginning in 2026 are unlikely, which points to several years of capital support for nonbuilding structures.
In short, FMI projects that after expanding more than 40% since 2020, growth will slow for the industry overall during our forecast period, while several segments and geographies will perform above average. Single-family residential construction will continue to drive demand for other construction segments (e.g., institutional and nonbuilding structures) and will support ongoing industry expansion.
Further, rapid advancements in artificial intelligence and quantum computing will continue to shape U.S. and global economies and provide opportunities across the engineering and construction industry for contributing participants. Despite broader U.S. economic challenges, this slower but more manageable pace of overall investment in the built environment should provide many stakeholders with opportunities to reassess priorities and work to address many of the longer-term challenges the built environment faces.
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