Construction & The Economy, Project Management & Efficiency

The Efficiency Mandate: Why 2026 Is the Year Construction Runs Out of People

As megaprojects surge and the workforce thins, builders will have to create capacity through efficiency, not headcount.

Frank Kalman
January 14, 2026

AEC Technology Outlook 2026: Industry Investment Climbs, but Integration Challenges Persist

Construction & The Economy, Technology & Innovation
Mike Ferrigno

New Bluebeam research reveals firms accelerating digital adoption while struggling to fully connect their tools.

Digital adoption in the construction industry is accelerating, but progress remains uneven. According to the Bluebeam AEC Technology Outlook 2026, most architecture, engineering and construction (AEC) firms are investing in new tools, yet many continue to wrestle with disconnected systems, inconsistent workflows and persistent pockets of paper-based processes. Below is a closer look at the report’s core findings.

What does the 2026 outlook reveal about AEC firms’ technology investment?

The 2026 outlook shows a sector eager to modernize but still far from fully digital. Firms are accelerating investment, yet many continue to rely on hybrid workflows that mix paper and digital tools — a disconnect that limits efficiency and prevents truly connected project delivery.

Most firms remain committed to modernization, according to Bluebeam research. Eighty-four percent plan to increase their technology investment this year, and 67% say digital tools are improving productivity. Still, only 11% of respondents consider their organization “fully digital” across all project phases. Hybrid workflows persist, especially during design reviews and project handoff, where printed documents remain part of everyday practice.

This widening gap between adoption and integration underscores a familiar theme: tools are being purchased, but they aren’t yet delivering seamless, end-to-end project continuity.

Why has integration complexity overtaken cost as the industry’s top barrier?

The shift toward integration as the top barrier signals a maturing digital landscape. Firms have the tools they need, but those tools rarely communicate. As workflows expand across platforms, interoperability — not procurement — has become the limiting factor in achieving reliable, connected project data.

Twenty-three percent of respondents cited integration as their primary barrier. Disconnected platforms lead to duplicated work, isolated data and reduced confidence in project information. And while firms are adopting more tools, many still function as standalone solutions.

The report notes a turning point: success now hinges on system-to-system connectivity rather than software acquisition.

How is technology influencing AEC workforce attraction and retention?

Technology is becoming a defining factor in how AEC firms compete for talent. As younger workers expect modern tools and streamlined processes, organizations are reevaluating how digital capabilities shape employee experience. Yet limited training investment remains a major obstacle, widening the gap between expectations and on-the-job readiness.

Digital tools are increasingly tied to workforce strategy. Forty-four percent of firms now view technology as a contributing factor in winning and keeping employees — a shift driven by younger workers’ expectations for modern tools and efficient workflows.

Yet training remains limited. Sixty-five percent dedicate less than 10% of their technology budgets to upskilling, even as 19% cite a lack of skilled digital talent as a barrier. The report suggests usability and training will emerge as critical differentiators in a tightening labor market.

What impact is AI delivering, and why is broader adoption still slow?

AI is beginning to prove its value in practical construction workflows, delivering measurable efficiencies for early adopters. Yet concerns around trust, data governance and integration keep adoption cautious. Firms are looking for AI that fits naturally into existing processes rather than experimental tools that introduce risk or complexity.

Early adopters report meaningful benefits:

AI Impact Snapshot

Metric Reported	Result
AI usage among firms	27%
Firms reporting ≥$50k savings	68%
Firms saving 500–1,000 hours	46%
Common concerns	Compliance, data ownership, responsible use

Despite the ROI, adoption remains measured. The report concludes that firms prefer transparent, integrated AI focused on tangible outcomes — not experimental features or opaque automation.

What separates the firms making the most progress in 2026?

Leading firms succeed by treating digital transformation as a connectivity challenge, not a software acquisition race. They focus on unifying workflows, improving usability and building teams that can fully leverage the tools they already own. This shift enables more consistent data flow and stronger project outcomes.

These organizations are finding momentum in connected ecosystems — not in the breadth of their software stack but in how well tools work together. As interoperability improves, teams gain more reliable data, fewer manual steps and greater confidence across project phases.

Download the Full Report

The AEC Technology Outlook 2026 includes:

Regional digital maturity data
Benchmarks for AI, integration and training
Insights from more than 1,000 AEC professionals
Recommendations for improving workflow connectivity

Download The Report

The Cost of Waiting: Lessons from Germany’s Construction Collapse

Construction & The Economy
Frank Kalman

What Europe’s building freeze teaches every contractor, architect and builder about resilience

Let’s talk about Germany.

Not the engineering powerhouse. Not the economic engine. The construction industry—right now, in 2025—that’s stuck in neutral and trying to remember what momentum feels like.

What’s happened over the past 18 months should matter to every contractor, architect and builder. This isn’t just a slowdown. It’s a reset. One that shows how fragile things get when you rely on cheap money, long timelines and blind optimism.

And if you think it can’t happen where you are? That’s what they thought.

How It Fell Apart

The numbers are brutal.

Mortgage rates shot from 1.3% to more than 4% between 2021 and 2024, according to the European Central Bank. Construction costs jumped more than 30%. Financing dried up.

Housing permits collapsed—down 27% in 2023, then again in 2024. Builders lost backlogs. Developers walked. Projects vanished.

Commercial jobs tanked too: office and mixed-use orders fell nearly 20% in two years, according to the German Construction Industry Association. Foreign investment hit its lowest point since 2013.

Even public infrastructure—the one bright spot—couldn’t carry the load. Germany’s €500 billion program kept civil engineering growing 3.4% in 2023 and 2024, but that did nothing for hundreds of mid-size firms locked out of the bidding table.

Hard Lessons for Builders Everywhere

Germany’s crash isn’t just Germany’s problem. It’s a construction problem. Here’s what everyone else should take away:

If your margins only work at 2% interest, they don’t work: Rates tripled. Spreadsheets stopped adding up. End of story.
Permitting delays don’t just slow projects. They sink companies: Germany’s approval process is famously glacial. Only now—after the crash—are reforms happening. Don’t wait until your backlog vanishes to cut red tape.
If you live in one sector, you die in one sector: Residential-heavy firms got hammered. The ones with a mix—industrial, retrofit, public—held ground.
Digital tools aren’t about speed. They’re about survival: The firms still standing didn’t just build better. They worked smarter—modular methods, digital permitting, connected markups. When the crunch came, they adjusted instead of scrambling.

Where the Work Still Is

Retrofit. It’s booming.

Old buildings + high energy costs + government subsidies = steady business. Insulation, HVAC, energy upgrades—it’s not glamorous, but it’s keeping crews busy.

And the firms with digital workflows? They’re quoting faster, collaborating clearer and winning more of that work.

What Happens Next

The German Economic Institute projects that real construction volume shrank by nearly 4% in 2024, marking the first contraction since 2009, followed by a further 0.8% decline in 2025—before a modest recovery of 2% is expected in 2026.

Reuters also reported forecasts of a 3.5% shrinkage to roughly €546 billion in 2024, with a slight 0.5% rebound in 2025.

Berlin’s housing push shows movement—but the numbers need precision. The city’s state-owned developer Gewobag is scaling up ownership to 80,000 apartments by 2030 to tackle affordability pressures, and a landmark €2.46 billion purchase of 14,750 apartments from corporate landlords underscores active expansion in social housing.

Insolvency trends underscore a fragile economy. In the first half of 2024 alone, corporate insolvencies surged—medium and large firms saw a 41% jump, and total filings rose 24.9% year over year. Projections estimate around 22,400 insolvencies by year-end, up roughly 11% from 2023.

A real recovery? Maybe 2026. Maybe later.

Don’t Wait for the Wake-Up Call

Germany didn’t collapse because builders stopped working. It collapsed because systems stopped flexing.

Permits stalled.
Costs rose.
Tools lagged.
Projects froze.

Nobody moved fast enough.

So, ask yourself—whether you’re in Munich, Milan, Marseille or North Dakota:

Can your team pivot when the numbers shift?
Can your workflows move fast enough when every hour counts?
Are you still stuck in paper, email chains and silos?
Are you modernizing before you’re forced to?

Because in this industry, you don’t rise to the occasion. You fall to the level of your systems.

Germany learned that the hard way. You don’t have to.

Don’t wait until your backlog vanishes—build resilience now.

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How to Protect Your Construction Contracts from Tariff Chaos

Construction & The Economy
Frank Kalman

New U.S. tariffs on steel and aluminum are driving up construction costs—this free AI-powered tool helps contractors quickly assess contract exposure and mitigate financial risk

The U.S. construction industry is bracing for another round of price volatility as the federal government recently announced steep tariff hikes on steel and aluminum imports. Duties on Chinese steel and aluminum are set to double, increasing from 25% to 50%, and other global trade restrictions could further impact supply chains.

For general contractors, subcontractors, developers and suppliers, these tariff changes introduce significant financial risk, particularly for projects with fixed-price contracts that do not account for cost increases. With steel and aluminum among the most widely used materials in construction, these new tariffs could cause budget overruns, delays and legal disputes.

“The construction industry operates on tight margins, and sudden cost increases like these can throw entire projects into financial uncertainty,” said Josh Levy, CEO and co-founder of Document Crunch. “If contractors don’t know what’s in their contracts, they could end up eating the cost of these tariffs—sometimes in the millions of dollars.”

Industry leaders and risk managers are now faced with a pressing question: How can firms protect themselves from sudden tariff-driven cost increases?

To help contractors assess and mitigate risk, AI-powered document intelligence and compliance platform Document Crunch, in partnership with the Nemetschek Group, has launched a free Tariff Risk Assessment Tool. The tool is designed to help construction firms quickly analyze their contracts for exposure to tariff-related cost fluctuations, providing instant clarity on financial and legal obligations.

Why Tariffs Create Contract Risks for Construction Firms

The construction industry is no stranger to material cost fluctuations, but tariffs present a unique challenge. Unlike market-driven supply chain price shifts, tariffs are imposed suddenly due to geopolitical policies and trade disputes—often without warning.

For construction professionals, this creates three major risks:

Locked-in Pricing with No Adjustments: Many projects are bound by contracts signed months or years in advance—and these agreements often lack clauses that allow for price renegotiations due to tariffs.
Unclear Cost Responsibility: When tariffs increase costs, who absorbs the financial burden? The contractor, supplier or client? Without clear contract language, firms risk unexpected cost overruns.
Legal and Financial Uncertainty: Many contractors don’t have the time or resources to manually review contracts to determine if they contain price adjustment clauses or force majeure provisions that may provide relief.

“One of the biggest problems we see is that many contractors assume they have protection in their contracts when, in reality, they don’t,” Levy said. “Without the right clauses in place, you could be stuck footing the bill for something completely outside of your control.”

This lack of clarity is especially problematic for small- and mid-sized contractors who cannot afford expensive legal reviews but still need to protect themselves from financial losses.

How the Document Crunch Tariff Risk Assessment Tool Works

Recognizing the immediate need for risk assessment, Document Crunch has launched a free, AI-powered Tariff Risk Assessment Tool that provides contractors with instant visibility into their contractual exposure.

Using AI-driven document analysis, the tool scans contracts for key risk indicators, such as:

Price Adjustment Clauses: Identifies language that allows cost-sharing for material price changes.
Force Majeure and Supply Chain Disruptions: Highlights clauses that protect against delays due to tariffs.
Change in Law Provisions: Determines whether new tariffs qualify as a reimbursable project cost.
Notice Requirements: Ensures contractors meet deadline and format obligations for reporting cost changes.

“Contractors don’t have weeks to dig through contracts—our AI can analyze them in minutes and flag exactly where you may have risk exposure,” Levy said.

By automating this process, Document Crunch eliminates the need for time-consuming manual contract reviews, enabling firms to proactively address financial risks before they escalate.

Who Can Use It?

Available for free to general contractors, subcontractors, material suppliers and developers.
Users can assess up to 10 contracts—a limit designed to cover most active projects a user is managing today.

How to Access It:

Sign up via the Document Crunch website.
Upload contracts for automated AI-powered analysis.
Receive instant insights on tariff-related risks.

Why AI-Powered Document Intelligence Is Critical for the AEC Industry

Beyond tariffs, document intelligence is becoming an essential risk management tool for construction firms. As the industry faces increasingly complex regulatory environments, AI-powered platforms like Document Crunch help firms proactively manage risks, reduce disputes and protect profit margins.

“We’re seeing more firms adopt AI for contract management and general compliance across all project documents, not just for tariffs but for all kinds of project risks,” Levy said. “The days of manually combing through project documents are over; technology can help construction firms stay ahead of financial threats.”

Here’s why more construction firms are turning to AI-driven contract analysis:

Faster Risk Assessment: AI scans complex documents in minutes instead of days or weeks, accelerating project approvals and financial planning.
More Informed Decision-Making: Contractors get clear, actionable insights, eliminating guesswork in contract negotiations.
Stronger Financial Protection: By identifying cost exposure early, firms can renegotiate terms or adjust pricing strategies before cost increases impact profitability.
Scalability: Large firms managing dozens of contracts across multiple projects can automate compliance and risk checks, reducing administrative burdens.

Don’t Let Tariffs Put Your Projects at Risk

The construction industry is at a critical moment—and firms cannot afford to wait. Tariff increases are already driving up costs, and without contract protections, companies may be forced to absorb unexpected expenses that cut into margins.

The good news: The Document Crunch Tariff Risk Assessment Tool is free to use—and provides immediate clarity on financial exposure.

“We built this tool because we believe contractors deserve to know where they stand,” Levy said. “With tariffs hitting the industry hard, this is about more than just business—it’s about doing the right thing to help the industry navigate uncertainty. This is a true moment in time and we want to help the industry sustain itself through this time.”

Ready to assess your tariff risk?

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How Contractors Can Win More Projects by Mastering Federal Policy Changes with Digital Tools

Construction & The Economy
Parth Tikiwala

Contractors that embrace digital tools can navigate federal policy changes with ease, ensuring compliance, reducing risk and gaining a competitive edge in securing government contracts

The construction industry runs on tight deadlines, complex logistics and, increasingly, federal policies that shape how projects are funded and managed.

Shifts in government policies and guidance—which often happen when new presidential administrations take over—can introduce new compliance mandates, permitting requirements and reporting standards, turning static processes into moving targets.

Contractors that stay prepared can not only avoid delays but also gain a competitive edge in securing government contracts.

Digital tools like Bluebeam and others are transforming how contractors navigate this changing landscape, offering streamlined processes that boost efficiency and reduce compliance risks.

Here’s how contractors can build resilience and thrive, no matter what policy changes come next.

How Federal Policy Changes Impact the Construction Industry

Federal policies don’t just change what projects get funded; they can reshape how construction firms must operate. Recent legislation such as the Infrastructure Investment and Jobs Act has led to increased funding but also tighter compliance requirements around sustainability, digital permitting and transparent project reporting.

Contractors must respond swiftly to policy-driven demands or they risk losing valuable government contracts. Being aware of key drivers—such as mandates for climate resilience, data security and modernized permitting—helps firms plan ahead and stay competitive.

Creating a Resilient Tech Infrastructure for Construction Success

Invest in Scalable Solutions: As government policies and regulations evolve, construction firms need digital platforms that can grow with them. Cloud-based tools like Bluebeam enable seamless collaboration, even across geographically distributed teams. With features like real-time document sharing and version tracking, contractors can ensure that compliance updates are reflected instantly.

Prioritize Data Security: Federal contracts often come with strict IT compliance standards to safeguard sensitive project data. Bluebeam’s secure cloud infrastructure provides encryption, controlled access and detailed audit trails—helping firms meet these stringent requirements with ease.

Integrate Project Management Tools: Disconnected tools can create bottlenecks. Bluebeam’s ability to integrate with leading project management systems ensures a cohesive technology ecosystem that supports efficient permitting, inspection tracking and compliance documentation.

Proactive Compliance Strategies for Construction Success

Staying ahead of federal policy changes means taking action before regulations shift. Here’s how contractors can future-proof their operations:

Conduct a Tech Readiness Audit: Assess your current technology stack and identify gaps in compliance, reporting and security. A full audit can reveal outdated processes that could slow down project approvals.

Adopt Digital Permitting Tools: Manual permitting processes can’t keep pace with evolving policies. Use tools like Bluebeam and GoCanvas to enable digital plan reviews and digital submissions, speeding up approval timelines and reducing paperwork errors.

Automate Document Management: Compliance often comes down to having the right documentation at the right time. Automated workflows ensure critical records are tracked, filed and easily retrieved during audits.

Create a Compliance Task Force: Establish an internal team to monitor policy changes, to ensure implications of these changes and update processes to train staff on new technology implementations. A dedicated team can reduce reactive adjustments and ensure continuous project compliance.

How Tech-Driven Strategies Ensure Construction Success

Success in the construction industry isn’t just about meeting today’s requirements—it’s about preparing for tomorrow’s challenges. Firms that invest in digital collaboration tools like Bluebeam can centralize their workflows, simplify compliance and improve overall project efficiency.

By turning policy-driven demands into opportunities for innovation, contractors can build smarter, manage risk more effectively and strengthen their competitive edge—all while keeping projects on track and on budget.

Stay Ahead: Preparing for Future Federal Policy Changes

The only constant in the construction industry is change—especially when it comes to federal policy and guidance. Contractors that proactively invest in scalable, secure digital tools can adapt faster, meet evolving compliance standards and unlock new growth opportunities.

Stay ahead of federal policy changes.

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

Construction & The Economy
Frank Kalman

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.

…..

Top Features Tenants Desire in Modern Office Spaces

Wellness Amenities: Fitness centers and green spaces are must-haves.
Sustainability: LEED-certified buildings attract eco-conscious tenants.
Transit Access: 66% of tenants rank proximity to transit as essential.
Tech Integration: Smart systems and IoT-enabled features are vital.

…..

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.

…..

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.

…..

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:

Understand Tenant Needs: Focus on delivering spaces that prioritize flexibility, wellness and innovation.
Leverage Technology: Invest in tools that enhance collaboration, improve accuracy and streamline workflows.
Commit to Sustainability: Partner with clients to deliver environmentally conscious projects with measurable investment returns.
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.

Ready to build smarter, faster and greener?

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

Construction & The Economy
Frank Kalman

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

Construction & The Economy
Frank Kalman

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:

Lock in Long-Term Contracts: Secure agreements with suppliers to hedge against price volatility.
Diversify Supply Chains: Build relationships with multiple suppliers—both domestic and international—to safeguard against disruptions.
Leverage Technology: Implement tools like BIM and predictive analytics to improve forecasting and optimize material use.
Advocate for Balanced Trade Policies: Engage with policymakers to ensure trade measures support economic stability while safeguarding national interests.
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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How Trump’s Immigration, Tariff Policies Could Reshape Construction

Construction & The Economy
Frank Kalman

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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