A spacious, unfinished high-rise office with floor-to-ceiling windows overlooking the New York City skyline, including the Empire State Building. The modern, open-floor space reflects the growing demand for premium office real estate, highlighting the opportunities for AEC leaders in the evolving high-end office market.

Office Real Estate’s Big Shift: How AEC Leaders Can Win the High-End Space Race

  • Construction & The Economy
As companies chase top-tier office spaces, the AEC industry has a prime opportunity to set new standards with cutting-edge design, sustainability and tech-driven innovation.

Five years after the COVID-19 pandemic reshaped how and where we work, the US office real estate market stands at a pivotal juncture.

In major cities, outdated office buildings remain underutilized, driving record vacancy rates of 20.4% in primary markets, according to CBRE Group market insights. Meanwhile, high-demand areas like New York’s Park Avenue and Los Angeles’ Century City face a shortage of premium office spaces, with vacancy rates plummeting into single digits, as reported by The Wall Street Journal.

Moreover, as more companies mandate full week return to offices, the demand for high-quality workspaces appears positioned to accelerate further.

These trends present a clear message for construction industry executives: the market is primed for reinvention, and the architecture, engineering and construction (AEC) industry is uniquely positioned to lead the way.

Current market conditions reflect both challenges and opportunities. Businesses seeking modern, sustainable and amenity-rich office environments are prepared to pay a premium for spaces that meet their needs. For AEC leaders, this is a moment to innovate, adapt and shape the future of office spaces.

Shifting Tenant Priorities: Redefining Office Space Expectations

The criteria for desirable office spaces have shifted dramatically. While location remains important, tenants now prioritize amenities, sustainability and technological integration. Features such as wellness-oriented spaces, energy-efficient designs and connectivity to transit hubs have become essential, rather than optional.

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Top Features Tenants Desire in Modern Office Spaces

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In New York’s Park Avenue district, asking rents have surged by 20% over the past two years, exceeding $150 per square foot, according to The Wall Street Journal. Similar trends are visible in Los Angeles’ Century City and Miami’s Brickell neighborhood. Tenants are fiercely competing for premium spaces that align with their organizational values and operational needs.

Conversely, older and uninspiring office buildings have become liabilities, according to the Journal report, challenging developers and property owners to rethink and repurpose these spaces to remain competitive.

Navigating Opportunities and Overcoming Challenges in the AEC Industry

Transforming outdated buildings into modern workspaces is no small feat. Rising material costs, stricter sustainability regulations and compressed project timelines compound the complexity. Still, these obstacles also present opportunities for the AEC sector to drive innovation.

The Retrofitting Boom

Retrofitting aging structures requires creativity and technical expertise. Enhancements such as rooftop gardens, upgraded HVAC systems and digital infrastructure integration often involve navigating tight physical and regulatory constraints. Despite the challenges, retrofitting is typically more sustainable than new construction, aligning with the industry’s commitment to reducing environmental impacts.

Fostering Innovation

Tenant demands have opened new avenues for innovation, including:

  • Sustainability Certifications: Achieving LEED or WELL certifications is no longer a luxury but a necessity to enhance tenant retention and increase property value.
  • Adaptive Reuse: Transforming office spaces into mixed-use or residential developments is reshaping urban landscapes.
  • Technology-Driven Solutions: Tools like building information modeling (BIM) and digital twins allow teams to visualize projects, minimize rework and execute with precision.

Inspiring Transformations: Case Studies of AEC Innovation

Park Avenue’s Renaissance: A historic office building at 470 Park Avenue South in New York recently underwent a transformative retrofit, emerging as a prime example of modern workspace innovation. The upgrades included a new roof terrace, a landscaped courtyard and state-of-the-art amenities designed to attract top-tier tenants. These enhancements have successfully drawn notable occupants such as DAZN and Anchorage Digital, highlighting the growing demand for sustainable designs and high-quality amenities.

Century City’s Evolution: Century City in Los Angeles illustrates the transformative potential of revitalizing older office complexes. A standout example is the Century City Center, a 37-story office tower reimagined with features such as a state-of-the-art fitness center, Class A office spaces and a two-acre garden atop a multi-level parking structure. Designed to achieve LEED Platinum certification, the building prioritizes environmental sustainability while integrating vibrant amenities like retail and dining options. These upgrades have successfully attracted leading technology and entertainment firms, positioning Century City as a hub for top-tier tenants seeking modern, amenity-rich work environments.

Driving Innovation: The Impact of Technology and Sustainability on Modern Office Spaces

Technology as a Catalyst: The AEC industry is leveraging cutting-edge technology to revolutionize project execution. Platforms like Bluebeam enable real-time collaboration, while BIM and digital twins provide actionable insights, reducing delays and optimizing costs. These tools not only streamline workflows but also enhance project accuracy and tenant satisfaction.

Sustainability as a Core Principle: Sustainability has shifted from an aspirational goal to an operational mandate. Tenants demand buildings that align with their environmental goals, emphasizing energy efficiency and renewable materials. For AEC leaders, this means designing systems that reduce waste and conserve energy, creating long-term value for both clients and communities.

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Future Trends in Office Real Estate

The future of office spaces is being shaped by evolving workplace dynamics and technological innovations. Key trends include:

  • Hybrid Work Hubs: With many companies adopting flexible work models, hybrid hubs are becoming the norm, offering adaptable layouts that support both in-person collaboration and remote connectivity.
  • Biophilic Design: Incorporating natural elements like indoor greenery, natural light and ventilation is increasingly popular, boosting employee well-being and productivity.
  • AR/VR Integration: Virtual and augmented reality are transforming office planning and leasing, allowing prospective tenants to visualize spaces and make informed decisions remotely.
  • Mixed-Use Developments: Office spaces are merging with retail, residential and leisure components, creating vibrant, multi-functional environments that cater to diverse tenant and community needs.

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Actionable Strategies for AEC Leaders to Thrive in a Competitive Market

To capitalize on the demand for premium office spaces, AEC professionals should consider the following strategies:

  1. Understand Tenant Needs: Focus on delivering spaces that prioritize flexibility, wellness and innovation.
  2. Leverage Technology: Invest in tools that enhance collaboration, improve accuracy and streamline workflows.
  3. Commit to Sustainability: Partner with clients to deliver environmentally conscious projects with measurable investment returns.
  4. Cultivate Partnerships: Build strong relationships with developers, property owners and tenants to align goals and drive success.

Shaping the Future of Office Spaces in the AEC Industry

The rising demand for high-quality office spaces offers a unique opportunity for the AEC industry to redefine the workplace. By embracing sustainability, leveraging technology and prioritizing tenant needs, the industry can not only meet current challenges but also shape the future of urban environments.

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Rising construction costs in 2025: A view of reinforced concrete and steel framework at an active construction site, highlighting cost management challenges and policy shifts in the industry.

Construction Cost Management in 2025: Strategies to Overcome Rising Prices and Policy Shifts

  • Construction & The Economy
From digital tools to modular construction, explore the strategies firms are using to manage soaring costs while staying ahead of evolving regulations

The construction industry is bracing for another potentially turbulent era marked by escalating costs.

Material prices are rising, labor shortages are intensifying and inflation, though down from recent historic highs, is continuing to strain budgets across the sector. While these challenges alone are significant, the incoming 2025 Trump administration’s policies on infrastructure, domestic manufacturing and sustainability, among others, are set to further reshape the economic landscape for construction firms.

With demand for construction services expected to remain high, construction firms must navigate this storm of challenges while seeking innovative solutions to manage costs.

Why Construction Costs Are Rising in 2025: Key Drivers Explained

Material Price Volatility: The cost of key construction materials like steel, lumber and concrete has risen sharply due to continuing supply chain disruptions, geopolitical tensions and trade restrictions. The Producer Price Index for construction materials jumped nearly 20% over the past year, according to the U.S. Bureau of Labor Statistics. Tariffs on imported goods and limited global availability are compounding these issues, creating substantial budgetary pressures for construction projects.

These price surges are particularly challenging for long-term projects, where fixed budgets offer little room for adjustment. Firms must either absorb the additional costs or renegotiate contracts, both of which impact profitability.

Labor Market Pressures: The construction industry is grappling with a significant shortage of skilled workers. According to the Home Builders Institute’s Fall 2024 Construction Labor Market Report, there are currently 8.3 million payroll construction workers in the US, with 3.4 million employed in residential construction. The report estimates that approximately 723,000 new hires are needed annually to meet industry demand.

This labor gap, driven by demographic trends and fewer younger workers entering the trades, has led to higher wages and increased competition for talent. Retaining skilled workers has become a costly priority for many firms.

Inflation and High Demand: Inflation has affected nearly every aspect of construction, from the cost of fuel and equipment to administrative expenses. The Consumer Price Index (CPI) remains elevated, squeezing margins for construction firms.

Simultaneously, robust demand for private development and federally funded infrastructure projects is driving up competition for resources, further escalating costs.

2025 Policy Changes and Their Impact on Construction Costs

The Trump administration’s return to office in 2025 brings with it an ambitious agenda that will significantly affect the construction industry. Policy details are emerging, but several key areas are expected to drive change.

Infrastructure Investments: President Trump has reiterated his commitment to infrastructure development. Reports suggest the administration plans to expand funding for highways, bridges and broadband projects under the continuation of initiatives like the Infrastructure Investment and Jobs Act.

While these projects will create new opportunities, they are likely to increase demand for materials and skilled labor, exacerbating existing shortages.

“Buy American” Mandates: The incoming Trump administration has signaled a commitment to expanding “Buy American” mandates, which require federally funded projects to source materials domestically. This policy aims to reduce reliance on international supply chains and bolster US manufacturing.

Industry experts, however, caution that in the short term, this shift may lead to higher costs for construction firms as domestic suppliers scale up production to meet increased demand.

Sustainability and Deregulation: The Trump administration has signaled intentions to roll back certain environmental regulations affecting the construction sector, with a focus on promoting energy infrastructure projects. In April 2019, during his first term, President Trump signed executive orders aimed at accelerating energy infrastructure developments by easing environmental review processes.

While such deregulation may reduce compliance costs for some projects, firms committed to green building practices will need to adapt to evolving market and client expectations for sustainability.

Proven Strategies for Managing Construction Costs Effectively

Embrace Digital Tools: Digital platforms like Bluebeam provide powerful tools for tracking costs, optimizing workflows and improving collaboration across project teams. By minimizing errors and enhancing resource allocation, these tools can help firms streamline operations and reduce expenses. For instance, a study by Dodge Data & Analytics found that 71% of contractors using digital tools reported a measurable improvement in project efficiency.

Adopt Value Engineering: Value engineering offers a way to redesign projects for cost efficiency without sacrificing quality. By focusing on essential features and exploring alternative materials, firms can achieve significant savings. Prefabrication and modular construction, for example, allow for faster assembly and reduced labor costs, helping projects stay on budget and on schedule.

Strengthen Supplier Relationships: Long-term contracts and bulk purchasing agreements can help stabilize material costs and ensure availability during periods of volatility. Strong supplier relationships also foster collaboration, enabling firms to explore innovative solutions such as alternative materials or flexible payment terms.

Explore Modular Construction: Modular construction is emerging as a game-changer in the industry. According to McKinsey, modular techniques can reduce project costs by 20% to 30% while improving timelines. Off-site fabrication minimizes on-site waste and labor demands, aligning with both cost-saving and sustainability goals.

Address Workforce Challenges: Firms can mitigate labor shortages by investing in training programs, apprenticeships and partnerships with vocational schools. Offering competitive wages, benefits and clear career advancement opportunities can also improve retention rates.

How Sustainability Can Help Reduce Construction Costs

Implementing sustainability practices in construction may involve initial expenses, but they offer substantial long-term savings and revenue opportunities. Energy-efficient designs, waste reduction measures and the use of renewable materials can significantly lower operational costs and attract environmentally conscious clients.

Moreover, firms can benefit from government incentives, such as tax credits for green building projects. For instance, the Inflation Reduction Act of 2022 expanded tax credits for energy-efficient home improvements, allowing eligible contractors to claim up to $5,000 per home. These incentives not only offset initial costs but also enhance a firm’s market competitiveness by aligning with growing sustainability standards.

Future-Proofing Construction Firms Amid Cost Challenges

The construction industry faces a challenging landscape, with rising costs, labor shortages and shifting policies shaping its future. Still, these challenges also present opportunities for firms willing to innovate and adapt. By leveraging digital tools, exploring modular construction and aligning with government initiatives, construction companies can position themselves for long-term success.

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Steel pipes stacked in a warehouse, representing the construction industry's reliance on steel materials. The image reflects the impact of the blocked U.S. Steel merger on construction projects in 2025, highlighting the challenges posed by rising steel costs and supply chain disruptions in the industry.

What the Blocked U.S. Steel Merger Means for Construction Projects in 2025

  • Construction & The Economy
The blocked U.S. Steel merger is set to affect construction projects nationwide, driving up costs, straining supply chains and sparking innovation in materials and technology.

The United States government’s decision to block the $14.1 billion merger between U.S. Steel and Japanese-based Nippon Steel, citing national security concerns, has sent shockwaves through the construction sector.

Steel, a critical component in everything from skyscrapers to bridges, is already subject to rising costs and strained supply chains. This development raises an urgent question for construction industry leaders: What does it mean for pricing, supply stability and strategic planning in the face of uncertainty?

Navigating the Future of Steel Supply: Challenges and Opportunities for Construction

Steel remains the backbone of construction, yet U.S. Steel now faces significant hurdles as it navigates a future without Nippon Steel’s partnership. The company has warned of potential mill closures and relocations, which could further disrupt domestic supply chains. Meanwhile, demand for steel is climbing, fueled by large-scale infrastructure projects across the US driven by the Infrastructure Investment and Jobs Act.

The looming prospect of new tariffs—reportedly as high as 25% on imports—adds another layer of complexity. These measures, proposed by the Trump administration and aimed at bolstering domestic production, could inadvertently lead to higher costs and sourcing delays. For construction firms, this underscores the need to reevaluate their reliance on both domestic and international suppliers as global trade dynamics shift.

How Protectionism Is Driving Up Steel Costs and Reshaping Construction Budgets

Steel prices have always been volatile, and the blocked merger is likely to intensify this trend, experts say. Tariffs designed to protect domestic production often lead to price hikes, as reduced competition allows domestic producers to charge more. For the construction industry, this can be a game-changer.

Consider a $200 million infrastructure project: a 20% spike in steel prices could inflate costs by tens of millions of dollars, jeopardizing timelines, profit margins and even project viability. A 2024 McKinsey report identified material costs, particularly steel, as one of the top drivers of construction delays—a challenge that’s only set to grow in this new landscape.

Turning Construction Challenges into Opportunities: Innovation and Resilience in Action

While these challenges are daunting, they also open doors for innovation. Construction firms may increasingly turn to alternative materials such as engineered wood, composites and advanced concretes. While these materials can’t fully replace steel in heavy-load applications, they can reduce reliance on it in specific project types.

Alternative Materials to Watch: Building Smarter and Greener

As the construction industry grapples with rising steel costs and supply chain challenges, innovative materials are stepping into the spotlight.

Engineered Wood

  • What it is: Materials like Cross-Laminated Timber (CLT) are crafted from layers of solid wood bonded together, offering strength comparable to traditional building materials.
  • Why it matters: Engineered wood is lightweight, sustainable and has a smaller carbon footprint compared to steel and concrete. It’s especially suitable for multi-story residential and commercial buildings.
  • Key benefits: Faster construction times, lower material costs and carbon sequestration potential make it a popular choice for green building projects.

Composites

  • What they are: These materials combine two or more distinct components, like fiberglass or carbon fiber, to achieve superior strength and durability.
  • Why it matters: Composites are lightweight, corrosion-resistant and highly customizable, making them ideal for applications requiring unique design flexibility.
  • Key benefits: Improved performance in bridges, facades and roofing systems, with reduced maintenance needs over time.

Advanced Concretes

  • What it is: Engineered Cementitious Composites (ECC), also known as bendable concrete, are transforming how we think about durability.
  • Why it matters: Advanced concretes offer greater flexibility and crack resistance, improving the longevity of infrastructure like roads, bridges and tunnels.
  • Key benefits: Reduced repair costs, enhanced seismic performance and compatibility with sustainable additives like fly ash and recycled materials.

Why This Matters for Construction Leaders

Exploring these materials not only mitigates reliance on steel but also aligns with sustainability goals. By integrating innovative solutions like engineered wood, composites and advanced concretes, the construction industry can drive progress while addressing cost and environmental concerns.

Recycling offers another path forward. Advances in technology could make reused steel a viable alternative, lowering costs and minimizing environmental impact. Additionally, tools like building information modeling (BIM) and predictive analytics can optimize material usage, reduce waste and improve efficiency.

Building Resilience in Construction: Strategies for Navigating Uncertainty

Construction leaders must adapt to these evolving conditions with proactive strategies. Here are some key steps to navigate the disruption:

  1. Lock in Long-Term Contracts: Secure agreements with suppliers to hedge against price volatility.
  2. Diversify Supply Chains: Build relationships with multiple suppliers—both domestic and international—to safeguard against disruptions.
  3. Leverage Technology: Implement tools like BIM and predictive analytics to improve forecasting and optimize material use.
  4. Advocate for Balanced Trade Policies: Engage with policymakers to ensure trade measures support economic stability while safeguarding national interests.
  5. Embrace Sustainability: Explore recycled steel and alternative materials to reduce dependency on new steel production.

The Bigger Picture: How Trade and Politics Are Shaping the Future of Construction

The blocked merger highlights a broader trend of heightened scrutiny on foreign investments in critical industries. Construction firms should prepare for increased regulatory oversight and remain informed about trade policy changes that could affect materials and costs.

The decision also adds a layer of complexity to US-Japan relations, potentially straining trade talks. However, it may also create new opportunities for collaboration in infrastructure development or alternative investments that benefit both nations.

From Disruption to Opportunity: Innovating for a Stronger Construction Future

The U.S. Steel merger block is more than just a trade decision. It’s a pivotal moment for the construction industry. Rising costs and supply chain uncertainties may seem like obstacles, but they also underscore the need for innovation and resilience. By embracing new materials, leveraging technology and advocating for balanced policies, construction leaders can turn challenges into opportunities.

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A silhouetted construction crane and partially built structure stand against a golden sunset, symbolizing the construction industry's challenges and transformations. The image conveys resilience and progress, fitting for the topic of how immigration and tariff policies impact the construction sector.

How Trump’s Immigration, Tariff Policies Could Reshape Construction

  • Construction & The Economy
Proposed immigration and tariff policies may remake the construction industry by influencing labor availability and material costs

The rhythmic sounds of a construction site—machines whirring, hammers pounding, voices calling across the worksite—capture the essence of an industry that builds the nation’s future.

Yet beneath this steady progress lies an unsettling truth: the US construction industry is heavily reliant on immigrant labor, and looming changes in immigration policy threaten to disrupt this vital workforce.

As debates intensify around stricter immigration enforcement, the construction sector finds itself at a critical juncture. Here, we’ll examine how these policies could reshape the industry and explore strategies to mitigate the risks of labor shortages.

How Immigrant Workers Are Vital to the Construction Workforce

Immigrants play a crucial role in the construction workforce across the United States. Nationwide, undocumented workers make up approximately 13% of the construction labor force, according to a detailed 2016 Pew Research Center analysis. Those numbers appear to have risen more recently. According to a 2023 article from Construction Dive, roughly 23% of construction laborers in the US are undocumented immigrants.

This significant presence underscores the reliance of the industry on immigrant labor, particularly in addressing critical labor shortages at a time when they are especially problematic for the industry.

These workers fill both skilled and unskilled roles, ensuring that projects are completed on time and within budget. Their absence would create a void that contractors would struggle to fill.

What Stricter Immigration Enforcement Could Mean for Construction

Proposed immigration policies by the Trump administration advocating stricter deportation measures and tighter enforcement of work authorization requirements could significantly reduce the labor pool.

This reduction would have far-reaching consequences—especially for an industry already facing challenges in hiring.

The Associated General Contractors of America’s 2023 Workforce Survey revealed that 85% of contractors have unfilled hourly craft positions, with 88% of those firms reporting difficulty filling some or all of these roles. This shortage exacerbates existing hiring challenges, leading to project delays and increased costs.

The survey also found that 46% of firms are experiencing longer project completion times than initially scheduled due to workforce shortages, and 47% have raised bid prices to account for higher labor costs.

Labor shortages don’t exist in a vacuum; they ripple through the economy. Rising wages due to competition for workers could increase the cost of housing and infrastructure projects, straining public budgets and deepening the ongoing housing affordability crisis.

Tariffs on Steel and Lumber: A Perfect Storm for Construction

Tariffs on imported materials, including steel and aluminum, have significantly affected the construction industry. In March 2018, during Trump’s first presidential term, the US imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports, leading to increased costs for key construction materials.

For instance, between June 2017 and June 2018, the producer price index rose by 20% for aluminum mill shapes and 12.3% for steel mill products. These higher material costs, combined with existing labor shortages, have created a challenging environment for contractors, resulting in project delays and increased expenses.

The Trump administration’s proposed new tariffs are poised to further exacerbate these financial strains, compounding the challenges faced by contractors navigating rising costs and labor shortages.

Innovative Strategies to Tackle Construction Workforce Challenges

Faced with these challenges, the construction industry must find innovative ways to adapt. While no single solution can resolve a workforce crisis, several strategies can help mitigate the impact:

Investing in Automation and Digital Tools: Leveraging technology to streamline operations and improve productivity can reduce reliance on manual labor. Automated workflows and real-time collaboration tools can help teams work more efficiently, even with smaller crews.

Upskilling the Workforce: Training initiatives focused on equipping workers with modern skills, including the use of construction technology, can expand the labor pool. Partnerships with vocational schools and apprenticeship programs can play a critical role in this effort.

Strengthening Advocacy for Balanced Policies: Engaging with policymakers to create immigration laws that address workforce needs while ensuring security and fairness is essential. Industry leaders must advocate for reforms that provide legal pathways for immigrant workers and protect the stability of the construction sector.

Why Labor Shortages Impact More Than Just Construction

The implications of labor shortages extend beyond individual construction firms. Housing affordability, already a significant challenge in many parts of the country, could worsen as rising costs delay projects or make them financially unfeasible. Public infrastructure projects—essential for economic growth—may face similar challenges, with delays and budget overruns becoming the norm.

In this environment, the construction industry must find ways to ensure project continuity and quality. While adaptation requires investment, the cost of inaction could be far greater.

How the Construction Industry Can Adapt and Thrive Amid Challenges

To address these challenges, construction firms need to embrace a forward-thinking approach:

Broaden Recruitment Efforts: Expanding hiring pipelines to include more women, veterans and nontraditional candidates can help diversify and grow the workforce.

Promote Technological Integration: Emphasizing tools that improve efficiency can help offset the reduced availability of labor.

Collaborate Across Sectors: Government, educational institutions and industry leaders must work together to create solutions that benefit the entire construction ecosystem.

By focusing on long-term resilience, the construction industry can weather this period of uncertainty and emerge stronger.

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The image depicts a construction site at sunset, featuring various heavy machinery, including excavators, a crane, and trucks, positioned around a partially built concrete structure. The sky is vibrant with warm hues, emphasizing the contrast between the industrial scene and the natural backdrop.

6 Critical Construction Challenges in 2025 (And How Technology Can Solve Them)

  • Construction & The Economy
Discover how cutting-edge technologies like AI, robotics and cloud-based tools are transforming construction by addressing key challenges such as labor shortages, rising material costs and project delays in 2025

The construction industry stands at a pivotal crossroads—not just building taller skyscrapers or faster homes, but reinventing how it works from the ground up.

Pressed by labor shortages, sustainability mandates and rising costs, industry leaders are abandoning outdated methods in favor of technology-driven solutions. From AI-powered project management to autonomous robots on job sites, the future of construction is being built today.

Below, Built explores the six most pressing issues in construction for 2025 and beyond, and investigates how technology can help overcome them.

Construction Labor Shortage: Causes, Impact, Tech-Driven Solutions

Challenge: One of the biggest obstacles facing the construction industry is a critical shortage of skilled labor. As seasoned workers retire and fewer young professionals enter the field, the gap in skilled labor widens. According to a 2023 report from the Associated General Contractors of America, around 88% of contractors report difficulty finding skilled workers. This lack of manpower often leads to project delays and increased labor costs.

Solution:

Automation and Robotics: Automation and robotics are stepping up to reduce the strain on human labor. Machines are now capable of performing repetitive tasks like bricklaying, excavation and demolition, which not only speeds up the process but also improves safety. Robots, such as the semi-autonomous SAM100 bricklaying robot, can lay bricks more quickly and consistently than human workers, helping to offset the labor gap.

Additionally, construction management software streamlines scheduling, allowing companies to allocate their existing workforce more efficiently, ensuring that no labor is wasted.

Rising Construction Material Costs: Challenges and Tech Solutions

Challenge: Volatile material prices have long been a source of financial strain in the construction industry. Factors such as supply chain disruptions, inflation and other unpredictable global events have driven up the cost of essential materials like steel, lumber and concrete, putting pressure on project budgets.

Solution:

Predictive Analytics and Supply Chain Technology: Building information modeling (BIM) is one solution that helps mitigate these costs by optimizing designs and reducing material waste. BIM allows for precise material estimates, ensuring that only the necessary amount is ordered. By simulating how a project will look and perform in the real world, it also helps detect design flaws early, preventing expensive changes mid-construction.

Additionally, Internet of Things (IoT) sensors and predictive analytics tools help monitor material availability and prices in real time, allowing for smarter purchasing decisions. When supply chains are strained, companies can quickly pivot and adapt, minimizing delays and reducing costs.

Sustainability in Construction: Reducing Environmental Impact with Green Tech

Challenge: The construction industry is responsible for nearly 40% of global CO2 emissions, according to the World Green Building Council. As climate change intensifies, there is growing pressure on the industry to adopt more sustainable practices and reduce its environmental footprint.

Solution:

Green Technology and Energy-Efficient Design: Sustainable building materials like carbon-neutral concrete and recycled steel are emerging as eco-friendly alternatives. For example, innovations like hempcrete—a bio-composite made of hemp and lime—offer an environmentally friendly substitute for traditional materials while also providing insulation benefits.

Energy-efficient designs are another powerful solution. By leveraging BIM and advanced simulation tools, architects and engineers can model the energy performance of a building before it’s even constructed, ensuring that projects minimize energy use and emissions over their lifecycle.

In some cases, 3D printing is also helping to reduce waste. Companies are experimenting with 3D printing to create intricate building components that use only the necessary materials, eliminating excess and promoting sustainability.

Project Delays and Budget Overruns in Construction: Causes and Tech Solutions

Challenge: Project delays and budget overruns are an endemic problem in the construction industry. Factors like poor planning, unforeseen site conditions and inefficiencies in resource allocation often contribute to projects exceeding timelines and budgets.

Solution:

AI and Drones: AI is revolutionizing project management by predicting delays before they occur. Using data from past projects and real-time conditions, AI systems can identify potential roadblocks such as weather disruptions, equipment breakdowns or labor shortages, enabling better planning and resource management.

Drones are also playing a key role in improving project timelines. Equipped with high-definition cameras and sensors, drones can perform site inspections faster and more safely than human inspectors, providing real-time progress updates and detecting issues before they become costly problems.

Construction Safety Challenges: How Tech Is Making Job Sites Safer

Challenge: Construction remains one of the most dangerous industries, with high rates of injuries and fatalities. According to the Occupational Safety and Health Administration (OSHA), one in five worker deaths in the US occurs in construction.

Solution:

Wearables and AI-Powered Safety Monitoring: Wearable technology is increasingly used to monitor worker health and safety on-site. Smart helmets and vests equipped with sensors can track vital signs, detect unsafe conditions and send real-time alerts to both workers and site managers.

AI-powered systems can also predict potential safety hazards by analyzing historical data and monitoring current working conditions. With predictive analytics, construction firms can take preventive measures, such as adjusting workflows or updating safety protocols, to minimize the risk of accidents.

Solving Fragmented Communication in Construction with Collaboration Tech

Challenge: Construction projects often involve multiple stakeholders—architects, engineers, contractors and clients—each using different tools and systems. This fragmented communication can lead to misunderstandings, rework and project delays.

Solution:

Cloud-Based Collaboration Tools: Cloud-based platforms like Bluebeam offer real-time collaboration for all stakeholders, ensuring everyone has access to the latest project updates, designs and documents. These tools break down silos between teams and foster more transparent communication, reducing the likelihood of misaligned goals or missed information.

By integrating all project data into a single, accessible platform, cloud-based tools also support Integrated Project Delivery (IPD)—a methodology that brings all stakeholders together early in the project lifecycle to align objectives and minimize risks.

The Future of Construction: How Tech Is Shaping a Smarter, Safer Industry

The challenges facing today’s construction industry—from labor shortages to sustainability—are daunting. However, technology offers a promising path forward. From AI and robotics to green building materials and cloud-based collaboration tools, the construction sector is undergoing a digital transformation that promises to boost efficiency, safety and sustainability.

As more companies adopt these technologies, the construction industry will become better equipped to tackle its most pressing challenges, setting the stage for a more innovative and resilient future.

This article originally published on Industry Today.

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Construction Costs 2023

Where Will Construction Costs Go in 2023?

  • Construction & The Economy
Inflation, supply chain bottlenecks and near-term economic uncertainty have recently clouded contractors’ ability to forecast their project costs

Every year comes with its own set of economic opportunities and challenges in the construction sector. The companies that fare best over the long term are able to understand these forces and adapt their operations accordingly.

With 2023 already underway, it’s worth asking two related questions: First, what kinds of factors are poised to affect your building costs and expenses this year? And second, how can you build more efficient workflows that will help you stay efficient, both this year and beyond?

How will construction costs change in 2023?

The construction market is being pulled in multiple directions by several forces. Some factors impact construction companies’ budgets directly. These include the price of materials and supply chain disruptions. Others are more circuitous, but still important, such as higher lending costs leading to tighter financial conditions.

Taken together, it’s hard to paint 2023 as an easy or challenging market from a construction cost perspective. In some cases, contractors may find that certain types of jobs remain cost-efficient, while others are prohibitively expensive.

Cost balancing vs. demand shifts

The default state of the construction industry at the beginning of 2023 involves relatively high material costs and expenses. Forces such as inflation are having an impact on U.S. contractors’ prospects, according to the most recent ConsTrack360 databook on the industry.

The researchers did note, however, that over the course of 2023, general building costs for contractors are expected to decline. Contractors may also find that as the year progresses they’re taking on more federally funded infrastructure projects. Construction activity in sectors including residential construction and technology industry office space has been dampened by forces such as mortgage rate hikes, fears of a downturn and the same relatively high costs that troubled contractors at the end of 2022.

Elevated costs for materials and labor: A mixed outlook

While builders are anticipating cost pressures to continue, the current outlook has recovered somewhat from the previous year, according to another survey by Associated General Contractors of America (AGC) and Sage. For example, 73% of contractors (compared to 86% the year prior) expect to struggle with material costs as a major concern in 2023.

Contractors surveyed by AGC are slightly more concerned about labor costs in 2023 than in the prior year, as 63% cited it as a main concern this year compared to 58% in last year’s survey. Firms’ continuing struggle to find workers may end up driving costs higher in this area.

Beyond the immediate and direct expenses associated with labor and construction materials, construction leaders are keeping an eye on the macroeconomic picture. Nearly three-fourths of contractors are worried about the general financial impact of a potential recession or slowdown, with 73% listing this concern among their top priorities.

How do changing material costs impact construction?

When it comes to dealing with elevated costs for building materials, contractors have to face hard decisions. The immediate impact of higher material costs is shrinking profit margins, forcing firms to discover alternative responses to soften that blow as much as possible.

Some mitigation methods involve becoming more flexible. Increased material costs or delays associated with certain components could be caused by specific supply chain issues affecting particular suppliers. A report in “Construction Business Owner,” for instance, recommends that construction firms be more open to sourcing alternative construction materials and making substitutions.

There are also contractual ways for construction firms to protect themselves. Construction law firm Garcia & Milas recommend strengthening material price escalation clauses and force majeure clauses to make sure contractors will be compensated for sudden material price hikes in the middle of a job. While these legal maneuvers can’t target the root issues associated with higher costs and expenses, they can somewhat safeguard the bottom line.

Construction firms have another potential tool when working around unpredictable or elevated costs: technology. This helps in two ways: First, the use of automation allows employees to be more efficient, increasing the value of their time. Second, the insights provided by these tools can allow firms to work more effectively.

No matter how contractors aim to control their costs, technology should be part of the equation. This is because a suite of modern tools can deliver heightened performance regardless of market conditions. Put simply, becoming more automated is a natural evolution for builders.

What can a better takeoff process accomplish for companies?

One part of the construction process most prone to improvement through technology is the takeoff and estimation process. When contractors have a digital way to perform material takeoffs for each new construction project, the financial benefits can add up quickly.

Modern digital tools enable quick and accurate takeoffs by allowing users to quickly block out areas on a PDF plan document and estimate the necessary amount of any material. After making these estimates in the plan documents, employees can export the results directly into spreadsheets, proceeding efficiently with the bid process.

Truly high-quality takeoffs allow contractors to present accurate contracts that effectively reflect their material needs and related expenses. Especially in times of high material costs, these contracts can be vital for protecting the bottom line. A greater degree of accuracy helps every party at each step of the job, from the bid through completion.

A digital takeoff process also allows new construction project bids to proceed more cost-effectively in terms of office efficiency. When employees have effective digital takeoff tools, they can get more done in less time, putting together additional bids or performing other value-adding work. Freed from manual calculations, these workers are simultaneously lowering the risk of human error and putting time back in their days.

How can you run a more efficient construction business in 2023?

The construction benefits of technology don’t stop with takeoffs. Technology platforms that reach multiple areas of construction firms’ operations can deliver more effective workflows overall, equipping those firms to survive amid challenging economic environments.

Prices of essential building materials are still fluctuating through the early months of 2023, and experts say it may be some time before they stabilize. Industry news outlet “Construction Dive” cited forces ranging from weaker global lumber demand to supply chain breakdowns affecting sand and cement in an analysis of worldwide material cost trends. And with commodity prices also spiking, while others are leveling off, contractors need to be smart to keep track. Digital construction solutions represent the right tools at the right time for contractors to ensure their firms are a step ahead of the competition.

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Construction and the Cost-of-Living Crisis

  • Construction & The Economy
The UK is facing a near-perfect storm of economic headwinds, fuelled by inflation, rising interest rates and slumping demand. Construction firms, which face higher energy costs and rising prices for essential materials, can weather this, but it’s going to be tough.

It’s often said that the British like to obsess about the weather. Recently they have had another pressing topic to mull: the cost of living. More accurately, the cost of living crisis. 

Why “crisis?” Well, prices for a range of goods are rocketing, driven in part by the steep increase in the cost of energy. Incomes, relative to prices, are falling behind as inflation rises. Interest rates are at highs not seen for years in an effort to bring down soaring inflation. Meanwhile, the UK appears to be heading for a recession, which some fear could last a year. 

Why is this happening? What does the current climate mean for the economy and business, and specifically for construction? 

Why is the cost of living rising? 

The cost of living has risen sharply since the end of 2021 for a number of reasons. That it has become a crisis is largely due to several factors making their presence felt all at once. 

The impact of COVID-19 shouldn’t be underestimated. Pandemic restrictions dramatically slowed economic activity, a situation from which the UK has still to properly recover.  

There’s rising inflation, which along with a downturn in consumer confidence is eroding people’s spending power, with the cost of pretty much everything increasing faster than earnings. Inflation was already climbing before Russia’s invasion of Ukraine in February 2022 led to a breakdown in the supply of gas to several European countries, including the UK. Now domestic households and businesses alike face soaring energy prices for the foreseeable future. 

The UK has also been affected by a series of post-Brexit scenarios, where trade has been hit, particularly exports to the EU. Additionally, many businesses report permanently losing EU-citizen staff who went home as COVID-19 tightened its grip on the UK and haven’t returned.  

Then there was the hike in interest rates last year, following the then-Chancellor of the Exchequer Kwasi Kwarteng’s now-infamous “mini budget,” which rocked the financial markets and sent the cost of borrowing for businesses and mortgage holders skyrocketing.  

What does this mean for the cost of construction? 

Of course, the UK and other countries have faced economic crises before. Cyclical recessions have periodically rocked the UK, prompted by events such as the Middle East oil crisis in the mid-1970s and the global financial crash of 2008-09.  

However, the multifaceted nature of the current situation means there is little respite to be had, at least for the foreseeable future. Some, like the British Chamber of Commerce, don’t expect any semblance of growth to return until the last three months of 2023 at the earliest. 

Inevitably, this has had an impact on the construction industry, which has seen business slow and the cost of building materials and energy go up.  

According to the latest S&P Global/CIPS UK Construction Purchasing Manager’s Index report, the UK’s construction sector recorded a fall in business activity during December 2022, ending a three-month sequence of moderate growth. Worryingly, the rate of decline was the fastest since May 2020.  

The S&P report added that the December data highlighted a reduction in new orders placed with UK constructors, despite a “modest” uplift in November 2022. “According to survey respondents, the fall was driven by weak client demand, linked in turn to higher prices charged,” it said. 

This is resulting in what some in construction dub as a “cost of building crisis.” Supply chains have been tightening for some time, and while certain materials can be sourced relatively easily, albeit more expensively, others—such as steel and timber—are getting harder to come by. The situation in Eastern Europe has added to such pressures. 

Construction cost inflation is likely to get worse before it gets better. According to the Construction Leadership Council (CLC), rising energy and wage costs are expected to push prices upwards in the coming months: “Manufacturers of energy-intensive products (such as bricks, cement, glass, insulation and plasterboard) warn that although many have been able to hedge energy costs through Q1 of 2023, energy prices in Q2 and Q3 are expected to be considerably above historical (pre-Ukraine war) levels without further government support.” 

Amid the cost-of-living crisis, the construction sector has also been affected by the loss of workers, particularly those from the EU who left the UK during the pandemic and declined to return. Firms have reported struggling with recruitment drives among UK nationals. 

The reduced construction activity in December was most marked across the residential and civil engineering sectors. 

Leading housebuilders including Taylor Wimpey and Persimmon have warned they won’t be ramping up the delivery of new homes this year, pointing to an increasingly tough market—fuelled by a slide in consumer confidence—whose features include lower sales and rising cancellation rates.  

How can construction firms weather the cost-of-living crisis? 

So, what can construction firms do to navigate the impact of inflation and the cost-of-living crisis? Keeping a close eye on costs is an obvious example—although there is only so much firms can do to mitigate some increases. 

As the CLC has said, the sector, like others, will be seeking further backing from government, particularly around energy. However, ministers have already indicated that existing support will be scaled back from March 2022, a move described by the Federation of Small Businesses as “bitterly disappointing.” 

Strengthening the relationship with one’s supply chain and key customers is another important approach, although one would expect this already to be in place. 

Looking beyond one’s normal route to market is another option, according to experts. Noble Francis, economics director at the Construction Products Association, said firms should look at where the opportunities are.  

“Don’t just stay in your usual sector and chase work, bidding low,” he said. “That just exacerbates the situation, especially with high and uncertain cost inflation.” 

Offering extra support to staff where possible is another consideration. While housebuilders are responding to falling demand by reducing output, many firms, notably Barratt, are giving employees special cost-of-living payments to help them through the tough times. 

Meanwhile, using digital technology to get the most out of a team’s efforts will also increase opportunities for efficiency gains.  

Sharing information through digital collaboration across a range of stakeholders and being able to make changes quickly will speed up processes, improve accuracy and help deliver better quality outcomes. 

The difficult conditions we’re seeing will be with us for several months, with the cost-of-living crisis perhaps even stretching into 2024. But this uncertainty won’t last forever. The construction industry is resilient, and while there may be cutbacks and corporate casualties along the way, the sector will bounce back, as it always does.  

Circular Economy in Construction: How Cities Can Build a Greener Future

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Reimagining New York City Post-Pandemic Construction

NYC’s Business District Re-Think Could Be a Boon for Local Construction Firms

  • Construction & The Economy
New York City has initiated a plan to reimagine its commercial business districts for a post-pandemic world, a development that would inject local-area construction firms with fresh opportunity in the years ahead

If you’ve spent time in the downtown business district of almost any US city in the past three years, you may be familiar with one thing: near silence.

Well, not exactly silence. But few would disagree that cities in general have lost some luster in recent years.   

Prior to the COVID-19 pandemic in 2020, throngs of coffee-toting, earphone-wearing commuters would pour out of public transit systems en route to their offices, fueling cities and their local businesses with waves of energy and activity that, in the past decade, rejuvenated many previously downtrodden downtowns.

Today, that energy and commotion is a shell of what it was. The spike in post-pandemic remote work—some of which has become permanent—has muted such energy, and cities are starting to feel it. Many are beginning to take action that they hope will help reimagine—and re-energize—city centers so people have more reasons to spend time there besides going to work.  

New York City is one of those municipalities, and in May 2022, officials there decided to do something about it. Led by Gov. Kathy Hochul and Mayor Eric Adams, a group of 59 civic leaders and industry experts assembled the “’New’ New York Panel.

The group convened frequently in recent months to identify new opportunities for improving the city with an eye toward making its business districts better suited to this post-pandemic world. What comes from the effort may have a big impact on local construction in the years ahead, as the panel aims to make proposals that could call for land redevelopment and building conversions.

RELATED: How the Empire State Building’s Construction Remains a Wonder

The process so far has revealed a much larger opportunity than to just breathe life into commercial hubs abandoned by remote workers.

“While our initial charge was to revive business districts, we realized we needed to look at solving a wider range of challenges faced by all New Yorkers,” said Julie Stein, the panel’s executive director. “The plan addresses fundamental questions around transportation, housing, public space and access to childcare.”

“The plan,” or the panel’s 159-page report, “Making New York Work for Everyone,” was released in December 2022. It lays out 40 improvement proposals, with suggestions including improvements to public transit systems, creating a network of public spaces through Midtown Manhattan, the city’s main office district, and updating zoning to increase the number of housing units.

“New York’s success over the centuries has really been defined by our ability to adapt and convert crises into opportunity,” she said. “As one example, the city reinventing itself as a 21st century city after the 9/11 attacks, both by reimagining Lower Manhattan as a mixed-use community, but also transforming underutilized portions of the waterfront and diversifying the economy in terms of both sectors and certain geographic locations.”

Implications for architecture, construction

Implementation, Stein said, is “moving full steam ahead” as of January 2023, with regulatory processes underway at the city and state level to greenlight projects. But what does this mean for those companies and individuals who may be designing and building such improvements?

“The vision of making New York the best place to work no matter what you do includes a package of actions, and a lot of them are focused on the built environment of the city—landscape and infrastructure,” Stein said. “If we want our business districts to be more mixed-use, we will need to redevelop outdated office spaces into other things, including housing.”

Green building and retrofits are top of mind for the panel, Stein added, as are instituting sidewalk shed reforms, public space maintenance and protected bikeway infrastructure. While all of these initiatives sound promising to the architecture and construction industries, there are yet to be hard-and-fast timelines—something likely to come later.

Top three goals

Each of the 40 proposals laid out in the plan fall into one of three categories:

To “reimagine New York’s business districts as vibrant 24/7 destinations”: “This is about shedding the ideas of single-use districts and supporting Midtown in particular and it’s evolution into a great place where people not only work, but also live and play,” Stein said. “We have a suite of recommendations that talk about making live/work/play districts in Midtown and business districts throughout the city.”

Some of those strategies include investing in permanent public spaces and improving quality of life issues, like sustainability and cleanliness, across business districts.

To “make it easier for New Yorkers to get to work”: “This is about making sure we can improve commutes into New York City and strengthening employment hubs and workspaces in all five boroughs, if people want to work closer to home,” Stein said. “Work-from-home is a great option, but not everyone has space in their New York City apartment. One of our recommendations is the acceleration of modernization of libraries to become workspaces in low-cost ways.”

To “generate inclusive, future-focused growth”: The last goal includes strategies for establishing New York City as a hub for innovation, increased access to housing (specifically, 500,000 new housing units over the next decade) and trying to ensure that growth and access to opportunity is fair for all residents.

What this means for other big cities

New York City isn’t the only place where whispers of post-pandemic, city-wide improvements are at the forefront. News stories abound with chatter of previously busy business districts now bare and what that may mean for the future of cities.

“We are getting outreach from cities across the country who want to learn, and we are benefiting from others who have their own ideas for their cities,” Stein said. “Every city has different challenges. New York City is unique because we don’t have one traditional downtown.”

Stein hopes the nuanced lessons in the report help to inform a path forward for city improvements nationwide. “There are interconnected actions that can be taken from public and private standpoints to help with transportation, making childcare more affordable, reducing barriers to labor force participation and looking at broader workforce development systems,” Stein said. “What I hope to convey is a more complex thinking of what economic development is.”

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