Reasons for Optimism
Make no mistake – 2025 stands to be a very interesting year – one fraught with uncertainty facing many of the nation’s contractors. But at first blush, the environment may not appear so risky. After all, contractors have tended to remain busy in recent years, often complaining about the lack of sufficiently skilled workers to contend with all the work they have secured. Moreover, the election results of 2024 generally produced a more upbeat national business community. The promise of tax cuts and deregulation stand to drive more economic activity, presumably generating greater demand for construction services in the process, including in traditional energy industries.
There are additional reasons for optimism. A combination of government policymaking and rapid economic transformations has ushered forth the era of the megaproject. In November 2021, President Biden signed the Infrastructure Investment and Jobs Act. The $1.2 trillion package encompassed approximately $550 billion in additional monies for infrastructure and infrastructure-related spending. Much of that money has yet to be spent.
A wave of supply chain reshoring to America has created abundant opportunities for contractors that support the construction of factories and other industrial facilities. Massive federal subsidies have been offered to manufacturers of computer chips, batteries, and items related to alternative energy generation. That, in turn, has helped spawn billions of dollars in investment in fabrication plants.
Contractors tied to multi-billion dollar, multi-year projects face diminished economic uncertainty, and stand to remain busy for years. Tariffs under consideration by the Trump administration stand to drive additional manufacturing activity to America, potentially creating another generation of manufacturing projects. Between November 2021 and November 2024, the share of private nonresidential construction spending involving the construction of manufacturing facilities rose from 18 to 32%. In absolute terms, construction spending on these facilities expanded from an annualized rate of $92 billion to $235 billion.
And then there is artificial intelligence (AI). It may be that one day AI-fueled robots will destroy humanity, but for now it’s producing a wave of investment in data centers. Between November 2023 and November 2024, construction spending on data centers rose 43%. Hyperscalers, cloud service providers that utilize large-scale data centers to offer a variety of computing solutions, seemingly cannot acquire enough data storage and processing capacity. Accordingly, the surge in data center construction spending stands to continue for years, positioning many contractors for a period of unprecedented activity and profitability.