STRONG US CONSTRUCTION INDUSTRY EYEING UNCERTAIN FUTURE

The US construction industry has been defiant in recent years despite global economic headwinds hindering other regions. But supreme confidence in the sector is giving way to some worry, Mitchell Keller reports

A major construction zone at High Line Park near the Hudson River in New York City

IMAGE: ADOBE STOCK

It was starting to look like the post-pandemic construction industry in the US was invincible. Record inflation, effects from a trade dispute with China, and wars in Europe and the Middle East seemed to do little to deter activity in America; analysts estimate the US construction segment grew in value from about US$1.4 trillion in 2021 to more than $2 trillion by the end of 2024.

But times are changing, most notably at the presidential level. A Republican (Donald Trump) is in, having defeated a Democratic challenger in Kamala Harris. Harris only represented her party after incumbent president, Joe Biden, dropped out of the race late in his campaign.

These unprecedented circumstances certainly signal more unconventional times ahead. Partisan shifts at the executive level often unsettle industries, and this changing of the guard is expected to add some unease for the US economy in general.

But optimism still abounds, as contractors and builders largely see President Trump’s policies as favourable for the US: regulatory easing, corporate tax cuts, and increased infrastructure investment have construction leadership largely eager for his second term.

ombining the unease of transition with the hope of a more business-friendly future, the next year in US construction should have a mix of positives and negatives.

A glance back at 2024

With the calendar complete on last year, data is showing that US construction enjoyed one of its most active years in nearly two decades.

US-based enterprise consultancy Deloitte released its ‘2025 Engineering and Construction Industry Outlook’ and noted last year’s strengths. “2024 was defined by strong fundamentals, marked by a 10% increase in nominal value added and a 12% increase in gross output. The sector’s employment reached 8.3 million in July 2024, surpassing a previous peak of 7.7 million from 2006.”

Driving 2024’s successes were public infrastructure projects fuelled by the $1.2 trillion Infrastructure Investment and Jobs Act (2021) and about $400 billion from programmes like the CHIPS and Science Act (2022), which bolstered investment in semiconductor manufacturing facilities.

From the private sector, data centre construction was an enormous boost to activity, with more than $30 billion spent and allocated on those schemes throughout last year. That figure is expected to get bigger, as next year will see some of the largest data centres erected, including from owners like Microsoft, Amazon, Google, Meta, and other tech giants.

But it wasn’t all sunshine and roses. Material prices continued to surge in some segments, including some of the most vital to construction: steel, lumber and cement. Overall, material prices increased more than 4% from 2023 to 2024, according to the US Bureau of Statistics.

Increased material prices seemed to help construction suppliers, some of which enjoyed record years, but it drastically reduced margins for contractors. The high costs were made worse by lingering supply chain inefficiencies and transportation bottlenecks.

It’s a market condition that might lead to ‘K-shaped’ growth and retraction, with larger firms – better equipped to handle economic uncertainty – enjoying the top portion (growth) while medium and small firms may find themselves losing revenue (retraction).

And the uneasy conditions do surely favour larger firms. The expectation for major federal projects and data centre builds continuing into this year means the nation’s largest contractors should have little competition, even with regulatory easing expected by the Trump administration.

It’s a point outgoing Tutor Perini CEO Ron Tutor notes during the company’s secondquarter conference call in 2024. Tutor Perini is one of the largest US-based contracting and construction firms in the country.

“This limited competition is the result of a supply-demand imbalance as, frankly, there are so many major project opportunities and a small pool of contractors with both the physical and financial resources to prequalify, successfully bid, bond, and execute these projects,” he says, painting a future where Tutor Perini will consistently be on the shortlist for some of the largest construction and infrastructure projects in the nation.

M&A could reign in 2025

There’s no guarantee material costs and supply chains backups will ease in 2025. In fact, due to aggressive policy by the Trump administration on trade and immigration, it’s expected that materials and supply chain woes could worsen in the short-term.

GLANCE AT US CONSTRUCTION RENTAL DATA

A report released in late 2024 from Off-Highway Research – which specialises in the research and analysis of the international construction equipment market – reveals rental companies purchased almost one-third of all construction equipment sold in North America in 2023. US rental companies represent nearly 90% of the construction rental market on the continent.

The study found that rental companies accounted for 33% of the 333,000 units sold in the earthmoving, material handling and compact equipment range that year (the report excludes aerial platform sales.)

Material handling equipment – comprising telescopic handlers, mobile cranes and masted rough terrain forklifts – was the most popular category, with 79% of the units sold in 2023 going to rental companies.

Rental buyers also accounted for 28% of the 95,000 units sold in the earthmoving equipment range, which includes dump trucks, loaders, dozers, graders and excavators.

Compact equipment, which saw the highest volume of units sold in 2023 at 200,130, had a smaller share going to rental companies at 27%.

Chris Sleight, managing director of Off-Highway Research, says, “Rental is the single most important sales channel for equipment suppliers in North America, particularly in materials handling equipment for the construction industry, where they are hugely dominant.

“The report also reveals the large share of the market held by the major chains such as United and Sunbelt,” Sleight adds.

Both are US-based companies.

Among earthmoving products, articulated dump trucks were the most popular product with rental businesses, accounting for 55% of sales, followed by backhoe loaders at 35% and crawler excavators at 33%.

Data suggests equipment sales for 2024 dropped by around 8% compared to 2023.

Scissor lifts at a construction rental yard

IMAGE: ADOBE STOCK

As such, industry advisors anticipate M&A (mergers and acquisitions) will play a big role in lessening the sting of ballooning costs and import tariffs, particularly in 2025.

Deloitte says, “Mergers and acquisitions activity will likely be an important growth strategy for both large and small firms.

“Between August 2023 and July 2024, there were 528 completed M&A deals in the construction industry, totalling more than $38 billion, which is more than three times the deal value from the previous year.”

Interest rates are expected to go down again next year (or, at minimum, stay flat). The US Federal Reserve lowered the bank borrowing rate by 0.25% three times in 2024.

Michelle Ritchie, PwC

A better overall environment for borrowing should encourage more project starts, which may necessitate investment and partnerships. The increased ease by which to borrow money for these investments, too, should make M&A a regular tool in construction’s toolbox for 2025.

Michelle Ritchie, a deals partner for PricewaterhouseCoopers (PwC), tells International Construction that, even though a change in president brings some uncertainty, that most firms are now more comfortable making financial decisions knowing a general policy direction for the next four years.

“We’re past the uncertainty of the election,” Ritchie says, adding, “We’ve had three interest rate cuts, which is a big deal.”

Materials, solar firms ripe for M&A

Actions speak louder than words; since November’s election results have come in, a flurry of mergers and acquisitions have been announced.

One major purchase in that timeframe was Vulcan Materials Company – which claims to be the nation’s largest producer of construction aggregates – which purchased Superior Ready Mix Concrete. Staying in the sector, major readymix brand Quikrete announced it would purchase its rival Summit Materials for a staggering $11.5 billion.

While these megadeals may not be the norm, Ritchie believes they’re a sign of things to come across the construction sector. She says to watch the solar industry in particular as firms try to bolster their abilities in what – is expected to be – a growing construction segment.

“That’s an industry that seems ready to gear up big time,” Ritchie says, but firms are faced with tough questions like, “How do you store it? How do you capture it, and how do you maximise that?”

Energy and utility infrastructure construction are expected to remain on a growth trajectory, even if Trump’s administration moves investment away from renewable projects and into fossil fuel builds.

President Trump, on his inauguration day, confirmed his campaign motto of “drill baby, drill” would become policy. While private funding is likely to continue renewable energy projects, it’s possible Trump’s stance on producing more US oil could increase project starts in that segment.

But the advantages of solar are growing annually, and even if federal funding for renewable projects takes a dive, the private sector is likely to fill the gap. “We’re seeing a lot of interest in [solar] businesses, because they can translate to the data centres,” remarks Ritche, highlighting another booming – but energy intensive – subsector.

As a result, energy-related enterprises and construction firms are likely to get cozy this year and into the future. “The industry has pivoted to much more focused around the grid infrastructure, the power infrastructure and investments and the services around those investments and the energy transition.”

Ivan Franklin, Mitsubishi HC Capital

3 MAJOR PROJECTS COMPLETED IN 2024

A mix of federal funding and private investment financed a bevy of megaprojects in the US. Here’s a look at three that completed last year.

Plant Vogtle nuclear reactor – In July, the commercial start of Unit 4 nuclear power reactor at Plant Vogtle near Waynesboro, Georgia, US, signalled an end to a protracted and expensive project.

The Vogtle project was years behind schedule and costs were reported to have doubled to over US$30 billion. Construction started in 2013. Bechtel was the delivering contractor.

The Vogtle 3 steam reactors in Georgia, US, during construction

IMAGE COURTESY SOUTHERN NUCLEAR

Edged Energy data centre – In August, US-based Edged Energy, a sustainable infrastructure provider, opened its first North American data centre. The $250 million facility is the first of three data centres located on the 168MW high-tech campus. Edged plans to invest more than $1.5 billion at the site.

The campus is designed for high-density artificial intelligence (AI) workloads and equipped with advanced waterless cooling and ultra-efficient energy systems. Each data centre will be outfitted with the ThermalWorks waterless cooling system, which uses no water for cooling and is expected to save nearly 664 million gallons of water each year compared to conventional data centres.

Aston Martin Residences Miami – Delivered in partnership with property developer G&G Business Developments, the opening of Aston Martin Residences Miami in Florida, US, took place in April. It is the first residential skyscraper to be branded by Aston Martin. It stands 66 storeys and 818 ft tall (249m).

Situated beside the mouth of the Miami River, it features designs inspired by a boat’s sail – a common sight off the Floridian coast. It cost more than $333 million to construct.

The Aston Martin Residences high-rise tower in Miami, Florida, US

IMAGE: ADOBE STOCK

Finding the right financing

With mixed expectations, 2025 may be an important year for construction companies to remain nimble.

Ivan Franklin, vice president of construction for finance firm Mitsubishi HC Capital America, tells International Construction, “In the current market, I think the finance industry has adapted to the contractor’s evolving needs for flexibility in leasing and how they acquire equipment.

“Some examples that I’ve seen through our OEM Finance programs have been shorter term leases (24 months), seasonal payment structures, and a variety of different annual usage hour limits. The main idea is to match the lease terms to contractor’s project timeline and cash flows,” Franklin says.

And 2025 could prove as good of a time to divest as it is to invest. For firms scaling up and finding value in ownership, or for some looking to offload some machines, there are avenues for both to help reduce back-office costs.

“It comes down to the specific contractor and their business, [for instance] if the equipment is seasonal or for shorter term projects leasing provides flexibility without a long-term financial commitment to ownership,” explains Franklin. “On the other hand, if you’re expecting high utilisation and have a steady project pipeline, ownership may make sense.”

Franklin says that a growing equipment asa-service (EAAS) model has become more favourable for contractors in recent years, too.

2025 outlook

The construction outlook for 2025 is mixed. While federal infrastructure funding is expected to continue, and with the private sector pumping billions into technology builds like data centres, there’s no reason to think this coming year will be short of activity.

But economists and construction leadership aren’t all in unison, which is a departure from the start of last year. In 2024, the industry was overwhelming optimistic, especially as billions from the IIJA was starting to facilitate.

It may be, at least while the executive branch transitions through the first few quarters, that construction will feel like it lost its footing. But, even if the worst of consequences come from Trump’s hardline policies, there should be silver linings – it would not be wise to bet against a successful year in US construction.

IC