From the\u00a0National Glass Association<\/a>\u00a0by Tara Lukasik on November 26th, 2024<\/p>\n\n\n\n <\/p>\n\n\n\n Last year presented several significant challenges for the construction industry, particularly in the commercial sector. The industry faces persistent difficulties in attracting and retaining talent, ongoing supply chain disruptions fueled by geopolitical tensions and global economic uncertainties, higher interest rates, economic uncertainty, inflationary pressures, and shifting regulatory hurdles in response to natural disasters and evolving building codes and environmental regulations.\u00a0<\/p>\n\n\n\n Despite these significant hurdles, construction spending crossed $2 trillion and maintained a balanced trajectory in the first half of 2024, according to a Deloitte analysis of data from the U.S. Census Bureau. And the Dodge Momentum Index, a measure of nonresidential building spending, has been on a steady rise in the second quarter of 2024, reflecting growing confidence in market conditions among owners and developers.\u00a0<\/p>\n\n\n\n \u201cThe reasons I feel most positive about 2025 really comes down to the fact that the Federal Reserve has started to cut rates,\u201d says Richard Branch, chief economist, Dodge Data & Analytics. \u201cWe had the 50 basis point cut from the Fed in September. We had another 25 basis points last week [in November]. We think the Fed will go again in December. That\u2019s a full 100 basis points of cuts this year. And we think there\u2019s another 100 basis point cut through the course of 2025. By the end of 2025, the Fed\u2019s funds rate will be at around 3%.\u201d\u00a0<\/p>\n\n\n\n \u201cWe\u2019re projecting inflation will be back at 3% to 5% as we move through the rest of the 2020s,\u201d says Connor Lokar, senior forecaster, ITR Economics. \u201cYou need to make a plan in your business with how you\u2019re going to deal with higher inflation and interest rates.\u201d\u00a0<\/p>\n\n\n\n With the three major categories\u2014residential, non-residential and infrastructure\u2014in totality, Dodge forecasts total construction starts will rise 9% in 2025, to $1.3 trillion.\u00a0<\/p>\n\n\n\n \u201cThe thing we really need to look at is how are lower rates impacting the economy,\u201d says Branch. \u201cWe need to process that there\u2019s not going to be a massive uptick in construction or economic activity. It\u2019s going to take probably about 125, maybe even 150 basis points, in cuts before we start seeing a more consistent growth in the economy the construction market.\u201d\u00a0<\/p>\n\n\n\n Branch\u2019s optimism on the construction sector is tied into the Dodge Momentum Index, which tracks nonresidential building projects under $500 billion as they enter the earliest stages of planning. Planning took a step backwards in 2023 over unfounded fears that the economy would go into recession, and developers began slow-walking projects through the planning cycle. The recession didn\u2019t materialize, and throughout 2024, the DMI remained reasonably stable, despite a mix of high rates, labor and materials challenges.\u00a0<\/p>\n\n\n\n \u201cThe one big takeaway I have is that this has remained stable for so long,\u201d says Branch. \u201cIt tells me that developers and owners feel reasonably positive that the conditions for construction will improve in the future, and they want to have projects sitting in the pipeline ready to go for when those conditions improve.\u201d\u00a0<\/p>\n\n\n\n \u201cHow is the election going to impact the forecast? Quite frankly, the truth of the matter is we just don\u2019t know,\u201d says Branch. \u201cIt\u2019s a mix of positive and negative for the construction sector.\u201d On the positive side, tax cuts could help the bottom line of construction tradespeople across the country. On the negative side, aggressive legislation on undocumented workers could possibly derail any growth potential in construction and manufacturing.\u00a0<\/p>\n\n\n\n Ken Simonson, chief economist, Associated General Contractors of America, predicts that lessened federal regulations anticipated under the incoming Trump administration could help some projects start sooner. At the same time, tariffs that President-elect Donald Trump has said he will institute have the potential to cause \u201ca huge spike in prices\u201d and could likely trigger a trade war, says Simonson. \u201cWe\u2019d see a lot of projects canceled or at least scaled back.\u201d\u00a0<\/p>\n\n\n\n A Trump presidency, with a potential Republican-led Congress, should positively impact the overall construction economy, according to Michael Guckes, chief economist, ConstructConnect, who agrees that a relaxed regulatory environment will promote construction activity, along with lower taxes and the opening of federal lands to development. \u201cThese changes could free the construction industry of the regulations that have historically held it back from faster growth,\u201d Guckes says.\u00a0<\/p>\n\n\n\n \u201cIt\u2019s unclear how much legislation is going to move in 2025 now,\u201d adds Simonson. \u201cPresident-elect Trump can impose tariffs without waiting for Congress, but some of the more drastic steps would require Congressional approval.\u201d\u00a0<\/p>\n\n\n\n Several geopolitical conflicts and tensions could impact the construction industry in 2025. From Middle East tensions impacting oil prices and transportation, agitation between the U.S. and China over trade policies that could disrupt supply chains and increase construction material costs, escalating trade tensions between the U.S. and the European Union, and the ongoing Ukraine-Russia and Israel-Hamas conflicts, many factors loom that could influence construction project timelines, budgets and availability of resources.\u00a0<\/p>\n\n\n\n Energy prices and geopolitical tensions are new risks added last year to the matrix that Dodge examines. Last year, Dodge predicted that geopolitical risk would remain intense, with tensions easing in the first three to six months of 2024. This year, Dodge is forecasting a \u201cfairly stable geopolitical situation.\u201d \u201cThat\u2019s not saying things will get better or that they\u2019re going to get worse,\u201d says Branch. \u201cBasically, there\u2019s no change from the situation now.\u201d\u00a0<\/p>\n\n\n\n New tariffs on imported materials could lead to higher costs, says Guckes. \u201cCertain proposed policies risk triggering higher construction costs,\u201d he continues. \u201cTariffs on imported construction goods, which would raise the price of these goods, may lead to a second spell of construction inflation.\u201d\u00a0<\/p>\n\n\n\n \u201cSupplies have been pretty ample, and prices have come down a lot over the past year,\u201d says Simonson. \u201cBut all that can be undone if President-elect Trump does impose across-the-board tariffs. When he did that for steel and aluminum\u2014a 25% tariff on steel, 10% on aluminum\u2014the domestic producers immediately matched those price increases. It\u2019s not guaranteed that all prices will go up as much as the tariffs, but you can count on extensive increases.\u201d\u00a0<\/p>\n\n\n\n \u201cThe labor market has been solid up to this point. We can expect it to continue to be so.\u201d \u2014Richard Branch, DCN\u00a0<\/p>\n<\/blockquote>\n\n\n\n The construction industry continues to struggle with a significant talent shortage, with an average of 382,000 job openings each month from mid-year 2023 to 2024, marking the third consecutive year of increased vacancies.\u00a0\u00a0<\/p>\n\n\n\n The industry is also experiencing a shift in skill requirements, with Deloitte projecting that 44% of infrastructure roles are expected to evolve in the next five years. The aging workforce is another concern; the National Center for Construction Education and Research projects the average age of trades workers will reach 46 by 2030. Younger generations, who have different expectations regarding work environments, are less interested in construction careers. In a 2024 workforce survey, the Associated General Contractors of America found that 50% of new construction industry hires fail to show up or quit shortly after starting.\u00a0<\/p>\n\n\n\n \u201cQuantity of qualified labor continues to be one of the greatest challenges that our industry is seeing and it\u2019s not going to be easily solved, especially if we think about some of the proposed policies by the new administration coming into office next year,\u201d says Guckes. \u201cThe construction workforce is very diversified; we benefit from people who come from all over the world. If, for any reason, that pipeline of people is pushed away, then we struggle with an additional supply issue. That means firms will struggle even more so to find enough qualified people.\u201d\u00a0<\/p>\n\n\n\n The new administration\u2019s immigration policy will also be extremely important, but Trump\u2019s comments on the issue \u201chave not been encouraging\u201d for contractors, says Simonson. \u201cConstruction has always relied more heavily than other sectors on foreign-born workers. And if the border really gets shut down more, and if deportations are part of the mix, that\u2019s going to hit construction even harder than other sectors.\u201d\u00a0<\/p>\n\n\n\n \u201cCommercial construction is fairly coincident with overall economic activity.\u201d \u2014 Richard Branch\u00a0<\/p>\n<\/blockquote>\n\n\n\n \u201cThe good news here is when you look at 2025, recovery is starting to bloom in commercial construction,\u201d says Branch. Commercial construction, closely tied to overall economic activity, is on the rise, with recovery signs becoming evident for 2025. The data includes new construction, additions and alterations, with trends influenced by inflation.\u00a0<\/p>\n\n\n\n AIA agrees that reconstruction activity will impact the construction outlook moving forward. Surveys conducted by the AIA have discovered that about 50% of billings at architecture firms come from work on existing buildings, including additions to existing facilities. AIA expects that the reconstruction share of total construction activity will continue to increase in the years ahead.\u00a0<\/p>\n\n\n\n \u201cWith the 2025 construction landscape, there is unpredictability,\u201d says Kristy O\u2019Brien, director of content acquisition, ConstructConnect. \u201cBut we\u2019ll be paying close attention to how remodels and repurposing of spaces continue to unfold\u2026 and if that continues.\u201d\u00a0<\/p>\n\n\n\n After soft demand over the past two years, architects are predicting a potential turnaround in 2025, says Kermit Baker, chief economist, American Institute of Architects. A recent survey by the institute found more than two-thirds of its member firms were \u201csomewhat confident\u201d or \u201cvery confident\u201d they will see improved business conditions in the next 12-18 months. \u201cCall me an optimist, but I think we\u2019re beginning to turn the corner,\u201d says Baker. \u201cI think we look to be near bottom and should be seeing things pick up again.\u201d\u00a0<\/p>\n\n\n\n \u201cIf we look forward into 2025 and beyond, we have hundreds of billions of dollars worth of mega projects that we continue to track in our forward-looking databases,\u201d says Michael Guckes. Although some could be delayed into a future year, Guckes says the inventory of existing mega projects if \u201cvery encouraging.\u201d\u00a0<\/p>\n\n\n\n Some forecasts are projecting a slowdown for nonresidential construction. Nonresidential construction is coming off a strong 2023 and 2024, but is heading for a slowdown in 2025, says Connor Lokar of ITR Economics during his economic forecast at GlassBuild America 2024. \u201cMost of you are busy. You are at the top of the business cycle. \u2026 We want you to make sure that we are observing an appropriate amount of caution,\u201d Lokar says. \u201cThis is not the Great Recession. This is just a softening.\u201d Lokar believes the market should rebound and \u201cramp up\u201d in 2026 and 2027.\u00a0<\/p>\n\n\n\n Retail construction is rebounding, closely tied to residential development. Typically, retail projects follow housing starts by about 12 months, but 2024 retail activity grew even though residential starts declined in 2023. This deviation reflects a focus on underserved areas, where developers are accelerating projects to meet demand.\u00a0<\/p>\n\n\n\n This recovery is expected to continue into 2025, bolstered by mixed-use developments that combine multi-family housing with retail spaces. Growth in multifamily projects, particularly those incorporating retail at ground level, is supporting the retail construction sector\u2019s momentum.\u00a0<\/p>\n\n\n\n \u201cThe strongest linkage between residential and non-residential is in the retail sector,\u201d says Branch. \u201cIt\u2019s about 12 months from breaking ground on single-family to breaking ground on retail. In 2023, residential starts declined, but we have retail growth growing in 2024, with retail activity happening in zip codes that were underserved from a retail perspective. This has changed; developers are trying to get in early and accelerate projects through the planning cycle. I think that trend continues into 2025, and you get the bonus of retail construction from the traditional 12-month lag.\u201d\u00a0<\/p>\n\n\n\n Leading retail chains are showing a mix of activity dominated by alterations. Walmart and Target are focused on renovations of older supercenters to appeal to suburban and rural customers, and grocery stores, quick-service restaurants and home-improvement chains like Home Depot, Lowe\u2019s and Harbor Freight are seeing strong activity, closely tied to residential development.\u00a0<\/p>\n\n\n\n Core office construction is expected to weaken further in 2025, with starts down 30% in square footage compared to 2019. Alterations now make up 50% to 55% of the market, reflecting upgrades from Class B to Class A space. The sector is unlikely to regain pre-pandemic levels in this cycle but may stabilize by 2026, with modest growth afterward.\u00a0<\/p>\n\n\n\n This trend reflects a long-term evolution, accelerated by the pandemic, similar to the retail sector\u2019s transformation after the Great Recession. While the office market has steadily declined since its peak in 1985, it is likely transitioning into a smaller but potentially healthier and more dynamic phase, according to Dodge.\u00a0<\/p>\n\n\n\n \u201cWhen we take out data centers from our office forecast, it doesn\u2019t look good,\u201d says Branch. \u201cBut bear in mind, alteration is usually about 30% to 35% of the market, and right now, it\u2019s closer to 50% or 55%. I would liken this to what happened to the retail sector after the GFC [Great Financial Crisis]. Many said that retail would die as e-commerce took over, but it didn\u2019t die; it evolved. It\u2019s certainly a much smaller sector than it was prior to the GFC, but I would argue that right now the retail sector is actually healthier and more dynamic than it was prior to the Great Recession. I think the same thing happens in office.\u201d\u00a0<\/p>\n\n\n\n Demand for AI, cloud security, backup and national security applications are driving aggressive data center construction growth. A key challenge for future expansion is the high energy demand of data centers. Power availability is becoming a constraint, with companies exploring solutions such as reopening nuclear plants and testing micro nuclear reactors. These factors may limit sustained growth rates beyond 2025.\u00a0<\/p>\n\n\n\n \u201cWhat we have for 2026 and forward is more of a plateau for data centers,\u201d says Branch. \u201cIt\u2019s not a decline, but power is a significant issue, and we think this could be a restraining factor to further data center build-out, or at least a continuation of these kind of growth rates once we get past 2025.\u201d\u00a0<\/p>\n\n\n\n The hotel sector has shown strong recovery post-pandemic, with occupancy rates returning to 70% and average daily room rates increasing. In 2024, the sector entered an upgrade cycle, evidenced by a 5% increase in square footage but a significant 31% rise in dollar value, highlighting higher-end renovations and rebranding efforts.\u00a0<\/p>\n\n\n\n Alterations dominate the current cycle, with hotels switching chains (e.g., Marriott to Hilton) or upgrading within brands. This mirrors patterns seen after the Great Recession, where initial upgrades transitioned into new construction. A shift to more new hotel builds is expected to begin in 2025.\u00a0<\/p>\n\n\n\n \u201cHotels have been the best news story here in commercial other than data centers,\u201d says Branch. \u201cOccupancy rates are pretty much right back where they were prior to the pandemic, and average daily room rates are growing nicely as well.\u201d\u00a0<\/p>\n\n\n\n Hotel construction activity is concentrated in upper-tier and upscale properties, driven by a post-pandemic focus on experience over value, reflecting the strength of leisure and tourism travel. Business travel is also rebounding, supporting growth in extended-stay and mid-market properties without food services.\u00a0<\/p>\n\n\n\n However, mid-market hotels with food services are seeing limited activity, potentially due to labor shortages, making it difficult to staff both hotel operations and kitchens. The ongoing upgrade cycle, once initiated, is unlikely to slow down, given the competitive nature of the hotel market. Historically, only major disruptions like the pandemic have paused such cycles.\u00a0<\/p>\n\n\n\n \u201cI think the good news on hotels is that once that upgrade cycle starts, it\u2019s really hard to stop. It\u2019s a very competitive market and it took the pandemic to kill the last upgrade cycle,\u201d says Branch.\u00a0<\/p>\n\n\n\n \u201cThis is a very diverse, very healthy market, coming off a lot of robust activity in 2024.\u201d \u2014 Richard Branch\u00a0<\/p>\n<\/blockquote>\n\n\n\n Institutional construction is expected to ease in 2025, partly due to its tendency to lag the broader market. However, the sector remains robust, supported by diverse and significant projects breaking ground across the country in 2024. While growth may decelerate after a strong 2024, the market is still characterized as healthy and diverse.\u00a0<\/p>\n\n\n\n \u201cInstitutional construction tends to lag the overall market, and that\u2019s part of why you see growth accelerating in 2025,\u201d says Branch. \u201cBut I don\u2019t want to characterize this market as losing momentum, because if you look at the largest projects breaking ground, this is a very healthy market with very diverse projects, coming off a lot of robust activity in 2024.\u201d\u00a0<\/p>\n\n\n\n The healthcare market, divided into clinics, nursing homes and traditional hospitals, shows varied trends. Clinic activity remains steady, resembling the retail sector with urgent care centers often located in commercial hubs. Hospital construction is increasing, driven by the development of hub-and-spoke systems linking clinics and hospitals, as well as mergers and acquisitions in the industry. Meanwhile, nursing homes have seen a 20% decline in square footage since the pandemic, with a shift towards active adult and independent living communities.\u00a0<\/p>\n\n\n\n The education market\u2014comprising kindergarten to grade 12 schools, colleges and universities, and laboratories, is experiencing mixed trends. Growth for K-12 is supported by favorable demographics in the Sunbelt and western states (excluding California), offset by weaker growth in the Midwest and Northeast. State funding is expected to dip in 2025, but strong local funding from higher property values should balance this.\u00a0<\/p>\n\n\n\n Demographic trends for colleges and universities are weak, with high tuition costs prompting more deferred enrollments, though vocational and trade school enrollments are rising. Competitive pressures among institutions to improve facilities create opportunities for construction projects. And after a surge during the pandemic, lab construction is now correcting and cycling back.\u00a0<\/p>\n\n\n\n Overall, education construction is projected to grow 8%, with K-12 outpacing the average, colleges at the average, and labs and other sectors (libraries, museums) lagging slightly.\u00a0<\/p>\n\n\n\n \u201cThe great thing about the college and university sectors is that it\u2019s very competitive, a lot like the hotel sector in the sense that there\u2019s a race within colleges to have the best facilities and labs,\u201d says Branch. \u201cWe saw a big uptick due to scientific initiatives in the wake of the pandemic, and then a bit of a correction happening. Now, lab construction is starting to cycle back.\u201d\u00a0<\/p>\n\n\n\n \u201cSingle-family residential construction leads the economy into recovery, and it leads the economy into decline.\u201d \u2014 Richard Branch\u00a0<\/p>\n<\/blockquote>\n\n\n\n \u201cWhat\u2019s happening in the residential market is key to understanding what\u2019s going to happen in the nonresidential space,\u201d says Branch. \u201cThe demographics are fairly positive. We\u2019re looking at 2.5 million new households, created between 2024 and 2025, so much faster than what we saw just prior to the pandemic. And a lot of this new household formation is taking place in \u2018Sunbelt States\u2019 where there\u2019s a lot of pent-up household demand.\u201d\u00a0<\/p>\n\n\n\n But this growth couldn\u2019t come at a worse time, says Branch. \u201cThe housing market is woefully under-supplied; our measure of the shortage is around 1.2 to maybe 2.2 million units.\u201d Upward pressure on housing prices will keep younger and less-affluent Americans from the single-family side of the residential market, forcing them into the multifamily market.\u00a0<\/p>\n\n\n\n \u201cSingle-family hit a trough back in early 2023 and has been rising steadily since then,\u201d says Branch. \u201cSingle-family units this year-to-date through September are up 18%. We expect the fourth quarter for single-family housing to be essentially flat. New home sales are up around 3% year-to-date for 2024. It looks like construction is a bit ahead of the market, and that\u2019s part of why we have single-family decelerating into 2025.\u201d\u00a0<\/p>\n\n\n\n Multifamily construction has been in a slump for the past 21 months, and completions for multifamily have been trending down since then, but Branch sees multifamily starts accelerating into 2025. \u201cIf you look at the multifamily vacancy rate, it\u2019s gone up about 7,500 basis points over the last year,\u201d says Branch. \u201cThis is still a fairly robust (and tight) market. Add on crowding out of the market and continued affordability issues on the single-family side, I would offer it can safely absorb more.\u201d\u00a0<\/p>\n\n\n\n Retail recovery is expected to continue into 2025, bolstered by mixed-use developments that combine multifamily housing with retail spaces. Growth in multifamily projects, particularly those incorporating retail at ground level, is supporting the retail construction sector\u2019s momentum moving forward.\u00a0<\/p>\n\n\n\n \u201cMultifamily planning projects actually troughed back in November 2023 and have been trending higher since,\u201d says Branch. \u201cIt takes somewhere around 17 months for a multifamily project to transit from planning to groundbreaking, so 17 months from November 2023 puts a trough in starts activity in early 2025. We think the planning data is telling us that there could be fairly aggressive growth in 2025 multifamily.\u201d\u00a0<\/p>\n\n\n\n PVpeople Glass Recruiter Mission<\/strong><\/p>\n\n\n\n The mission of PVpeople is to \u201cbe the best at delivering staffing solutions to solar and glass industry clients and improve the lives of the candidates placed.\u201d PVpeople is a tenured solar and glass recruiting firm by having created long term partnerships with hiring managers at companies around the globe. These solar and glass industry partnerships encourage mutual respect and operate under the highest degree of ethical standards. PVpeople recognizes that hiring decisions are the most important decisions a management team can make. Bringing in the right team, with the correct skills, will pay dividends every day. Let this be the year you see the difference that over 18 years of solar and glass recruiting expertise can make. Learn more about\u00a0PVpeople glass recruitment services<\/strong><\/a>.<\/p>\n\n\n\nMacroeconomic perspectives and projections\u00a0<\/h2>\n\n\n\n
U.S. economy holding its own\u00a0<\/h3>\n\n\n\n
Lower rates to support growth in 2025\u00a0<\/h3>\n\n\n\n
Dollar value of projects stabilizing\u00a0<\/h3>\n\n\n\n
The state of the transition\u00a0<\/h3>\n\n\n\n
Geopolitical conflicts and trade tensions\u00a0<\/h3>\n\n\n\n
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The high impact of imported materials\u00a0<\/h3>\n\n\n\n
Facing the talent shortage\u00a0<\/h3>\n\n\n\n
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Concern among contractors\u00a0<\/h3>\n\n\n\n
Nonresidential construction\u00a0<\/h2>\n\n\n\n
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Commercial starts on the rise\u00a0<\/h3>\n\n\n\n
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Retail starts on the road to recovery\u00a0<\/h3>\n\n\n\n
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Core office starts to weaken further in 2025\u00a0<\/h3>\n\n\n\n
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AI focus to boost data center construction\u00a0<\/h3>\n\n\n\n
Upgrade cycle for hotels began in 2024\u00a0<\/h3>\n\n\n\n
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Institutional building starts to ease in 2025\u00a0<\/h3>\n\n\n\n
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Health starts poised for growth\u00a0<\/h3>\n\n\n\n
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Education starts trending up, lab projects slipping\u00a0<\/h3>\n\n\n\n
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Residential Construction\u00a0<\/h2>\n\n\n\n
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Single-family decelerating into 2025\u00a0<\/h3>\n\n\n\n
Multifamily starts accelerating into 2025\u00a0<\/h3>\n\n\n\n
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