{"id":119684,"date":"2025-03-08T09:17:52","date_gmt":"2025-03-08T09:17:52","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/legal\/2025-construction-outlook-growth-but-uneven-in-certain-areas-california-construction-law-blog\/"},"modified":"2025-03-08T09:17:52","modified_gmt":"2025-03-08T09:17:52","slug":"2025-construction-outlook-growth-but-uneven-in-certain-areas-california-construction-law-blog","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=119684","title":{"rendered":"2025 Construction Outlook: Growth, But Uneven in Certain Areas | California Construction Law Blog"},"content":{"rendered":"


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\n\t\t\t\t\t\t\tBy \t\t\t\tGarret Murai<\/a><\/span>, \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t

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I think it\u2019s safe to say that we\u2019re well past any lingering economic<\/em> impacts of COVID-19 although it has undoubtedly left an indelible imprint on the lives<\/em> of many, including those still working remotely as reflected in the empty office spaces around the country<\/a>.\u00a0<\/p>\n

But with Trump 2.0 now here, new uncertainties face the country and the construction industry as President Trump imposes tariffs<\/a> on goods and materials, cracks down on immigration<\/a>, and attempts to shrink the government\u2019s footprint<\/a>.<\/p>\n

While President Trump and his proteges (e.g.,<\/em> Elon Musk) have been dominating the news headlines since the end of January, according to Dodge Construction Network\u2019s \u201cOutlook2025,\u201d notably issued in November 2024 before the new administration took office, believes that \u201cthe change in administration is unlikely to have considerable impact on the construction forecast.\u201d Rather, according Dodge (not to be confused with \u201cDOGE<\/a>\u201c), \u201c[p]erhaps most significant for the construction outlook is the Federal Reserve\u2019s changing stance on interest rates,\u201d referring to the Fed\u2019s rate cuts in 2024 which totaled 1 percentage point, which it believes \u201cwill begin to positively impact the economy, particularly in interest-rate-sensitive industries such as construction, during 2025.\u201d<\/p>\n

Notwithstanding its sunny view on interest rates, Dodge warns:<\/p>\n

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The impact of interest rates cuts may not be enough to significantly counter other existing market conditions, such as labor shortages and the higher cos of labor, land, and materials. These limiting factors mean more may be needed to move most construction projects forward. Even with further rate cuts in 2025, enthusiasm for a strong rebound in starts may need to be tempered.<\/p>\n<\/blockquote>\n

According to the report:<\/p>\n

Residential Construction<\/strong><\/p>\n

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Residential construction starts are expected to increase 12% in 2025 to $441 billion. Within the single-family sector, construction starts are expected to increase 9% to $292 billion, and within the multifamily sector, construction starts are expected to increase 16% to 148 billion.<\/p>\n

According to the report, in 2024 \u201cresidential construction has been strongest away from dense urban cores\u201d with the resulting benefit of \u201cmore nonresidential building as demand for stores, schools, and healthcare facilities increases accordingly.\u201d This is expected to continue into 2025.<\/p>\n

Despite the continued strength of residential construction, \u201chousing affordability and lack of supply (especially entry-level homes) remain the main issues facing the residential market,\u201d according to the report, and \u201c[e]ven as mortgage rates have fallen, home prices have risen by more than enough to offset any improvement in overall affordability.\u201d\u00a0<\/p>\n

Nonresidential Construction<\/strong><\/p>\n

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Nonresidential construction starts are expected to increase 6% in 2025 to $467 billion. Within the commercial sector, construction starts are expected to increase 7% to $170 billion, institutional starts are expected to increase 4% to 232 billion, and manufacturing starts are expected to increase 9% to $66 billion.<\/p>\n

According to the report, nonresidential construction \u201ccontinues to be a tale of two markets.\u201d \u201cWeakness caused by Amazon\u2019s exit from the warehouse market and much weaker demand for traditional office space has held back growth. However, burgeoning strength in hotel and data center starts has somewhat countered that weakness.\u201d<\/p>\n

New grocery stores and quick service food outlets supporting new residential construction as well as hotels benefitting from increased leisure and business travel are expected to be a bright spot within this market segment. Institutional starts are also expected to be \u201crobust\u201d due to its direct connection to residential activity and because high interest rates do not affect institutional constructions as much as commercial and manufacturing construction. However, manufacturing starts are expected to be \u201cunderwhelming\u201d due to slowing electrical vehicle demand and lack of skilled workers, but on the upside, semiconductors, petrochemicals and reshoring is expected to be above their long-term historical averages.<\/p>\n

Nonbuilding Construction<\/strong><\/p>\n

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Nonbuilding construction starts, such as bridges and highways, are expected to increase 9% in 2025 to $368 billion. Within the public works sector, construction starts are expected to increase 11% to $288 billion, and in the electrical power\/utility sector, construction starts are expected to increase 1% to $81 billion.<\/p>\n

According to the report, nonbuilding construction is expected to be \u201cgenerally favorable\u201d as this segment continues to benefit from the $1 trillion Infrastructure Bill with funding expected to last through 2027.\u00a0<\/p>\n

A full copy of Dodge Construction Network\u2019s \u201cOutlook2025\u201d report can be found here<\/a>.<\/p>\n

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