In an industry known for its resilience, construction company owners face a complex landscape in 2025, filled with promising opportunities and significant challenges.

According to the latest Construction Hiring and Business Outlook survey conducted by the Associated General Contractors of America (AGC) and Sage, the year ahead presents a mixed picture that requires strategic planning and adaptive management.

Market Segment Projections: Where to Focus Your Resources

The survey results reveal striking differences across construction sectors, providing valuable intelligence for company owners looking to position themselves advantageously in the coming year.

Data centers emerge as the standout opportunity, with a net positive reading of 42 percent - the highest among all 17 categories surveyed and a substantial increase from the previous year's 20 percent. This surge likely reflects the continued expansion of digital infrastructure to support artificial intelligence, cloud computing, and growing data storage needs.

For contractors seeking promising sectors, water and sewer projects (35 percent net positive), power projects (32 percent), and transportation structures like airports and rail (29 percent) offer compelling opportunities. Healthcare construction also shows strong promise, with non-hospital facilities at 27 percent and hospitals at 24 percent net positive readings.

Manufacturing plant construction deserves special attention, with a 25 percent net positive outlook—10 percentage points higher than in 2024. This upswing likely reflects reshoring initiatives and growing investments in domestic production capacity.

However, not all segments present equal opportunity. While K-12 and higher education construction maintain modest positive outlooks (13 and 12 percent respectively), these readings show slight declines from 2024. More concerning for business owners focusing on commercial real estate: private office construction (-3 percent) and retail projects (-5 percent) continue to show negative outlooks. However, these represent improvements from their deeply negative readings in 2024.

Federal Infrastructure Projects: Finally Gaining Momentum

Three years after the passage of the Bipartisan Infrastructure Law, these investments are finally translating into actual projects. Eighteen percent of surveyed contractors report having worked on new projects funded by the law - double the percentage from just a year ago. Another 12 percent have either won bids or are actively bidding on such projects.

This represents an important opportunity for construction company owners, particularly those with larger operations. Among firms with revenues exceeding $500 million, 28 percent have already secured work under the infrastructure law, compared to just 15 percent of smaller firms with revenues under $50 million.

Jeffrey Shoaf, AGC's chief executive officer, notes: "Firms expect regulatory relief will help drive demand and they will continue to hire, when they can, and boost investments in technologies, particularly artificial intelligence."

The survey suggests that contractor optimism regarding public-sector work stems partly from expectations that the Trump administration will streamline the permitting process, potentially accelerating numerous projects that have received funding but remain tied up in regulatory reviews.

Workforce Challenges: The Industry's Persistent Headache

Perhaps no challenge looms larger for construction company owners than workforce issues. While 69 percent of firms plan to increase their headcount in 2025 (with 21 percent anticipating growth exceeding 10 percent), finding qualified workers remains a formidable obstacle.

The statistics tell a concerning story: 78 percent of firms report difficulty filling hourly craft positions, while 77 percent struggle with salaried openings. Even more troubling, most contractors (55 percent) expect hiring craft workers will either remain difficult or become harder in 2025.

These workforce challenges have direct financial implications. More than half (53 percent) of surveyed firms increased base pay rates in 2024 by more than they had in 2023. Additionally, 28 percent provided incentives or bonuses, and another 28 percent increased benefit contributions or enhanced employee benefits packages.

Regional variations exist in these compensation strategies. Companies in the South were somewhat more aggressive with pay increases, with 61 percent offering steeper increases than in 2023, compared to 54 percent in the Northeast, 51 percent in the Midwest, and 50 percent in the West.

The survey points to a paradox facing the industry: while contractors worry about the impact of potential immigration restrictions on labor availability, they simultaneously report increasing concerns about worker quality. Among contractors' top concerns for 2025, workforce issues dominate: 62 percent cite rising direct labor costs, 59 percent mention insufficient supply of workers or subcontractors, and 56 percent highlight worker quality concerns.

Project Postponements and Material Costs: Twin Challenges

Construction company owners must also navigate persistent challenges with project delays and material costs. Approximately two-thirds of respondents report projects have been postponed or canceled - a level consistent with the previous three surveys. While 42 percent say projects were delayed but eventually rescheduled in 2024, 34 percent report projects that were canceled outright.

The primary reasons for these disruptions include rising costs (43 percent) and reduced funding availability (41 percent). A significant number (26 percent) also point to uncertainty surrounding election impacts.

On a more positive note, supply-chain problems have moderated considerably. Nearly half (45 percent) of respondents report no supply-chain issues in 2024, compared to 23 percent in 2023 and 9 percent in 2022. Still, many contractors continue to implement strategic purchasing approaches, with 41 percent accelerating purchases after winning contracts and 32 percent turning to alternative suppliers.

Despite these improvements, material costs remain a major concern, cited by 54 percent of respondents. This worry likely stems from potential new tariffs that could affect the global supply chain for construction materials and components.

Technology Investments: Embracing the Digital Future

In response to persistent challenges, construction company owners increasingly turn to technology solutions. Artificial intelligence stands out as the area with the greatest planned investment increase, cited by 44 percent of firms - up significantly from 30 percent in the previous survey.

Dustin Stephens, global head of construction at Sage, explains: "AI's potential to revolutionize construction workflows is driving increased interest and investment. Leading construction businesses are utilizing advancements in AI, cloud, and mobile technologies to operate more efficiently and tackle complex projects with greater agility."

Other key technology investment areas include document management software (40 percent), accounting software (36 percent), and project management software (35 percent). More than a quarter of firms also plan increased investments in fleet tracking/management, human resources software, building information modeling (BIM), and client relationship management tools.

Cloud-based technologies continue to play an important role, with 61 percent of firms using cloud-hosted project management tools. However, this digital transformation brings its own challenges - 41 percent of contractors cite keeping company data secure from hackers as their biggest IT challenge, while 39 percent struggle to find time for implementation and training.

Strategic Recommendations for Construction Company Owners

Given this complex landscape, construction company owners should consider several strategic approaches for 2025:

1. Sector Diversification: Companies heavily invested in struggling segments like office and retail construction should explore opportunities in higher-growth areas like data centers, healthcare facilities, and infrastructure projects.
2. Federal Project Positioning: Smaller and mid-sized firms should develop strategies to better compete for infrastructure law-funded projects, potentially through strategic partnerships or specialized service offerings.
3. Workforce Development: Given persistent labor challenges, invest in comprehensive recruitment and retention strategies, including competitive compensation packages, career advancement opportunities, and partnerships with trade schools and apprenticeship programs.
4. Technology Adoption: Carefully evaluate AI and other technology investments that can enhance productivity, improve project management, and help mitigate workforce shortages. Set realistic implementation timelines and ensure proper staff training.
5. Supply Chain Management: While supply chains have improved, maintain flexible procurement strategies and strong supplier relationships to hedge against potential tariff-induced price increases.

Advocacy Priorities

Construction company owners should also be aware of the industry's advocacy priorities as articulated by AGC, which include:

• Establishing new temporary work visa programs dedicated to the construction industry
• Passing the Stronger Workforce for America Act to boost funding for post-secondary construction training programs
• Increasing support for high-school construction training programs
• Revoking project labor agreement requirements for federal construction projects worth $35 million or more
• Implementing streamlined permitting processes

Ken Simonson, AGC's chief economist, notes in the survey that contractor optimism remains relatively high despite these challenges. With thoughtful planning and strategic adaptation, construction company owners can navigate the opportunities and obstacles of 2025.

"It will be a good year for the construction industry if the Trump administration works with us to find a way to address materials shortages, avoid materials price inflation, remove limits on who can work on federal projects, and streamline the permitting process," said Jeffrey Shoaf, AGC's CEO.

For construction business owners, success in 2025 will depend on their ability to adapt to market shifts, address workforce challenges creatively, leverage new technologies effectively, and maintain financial flexibility in an evolving economic landscape.