The Conference Board’s latest forecast estimated that U.S. real gross domestic product (GDP) grew by 2.7% in 2024, a year of surprisingly robust expansion. The think tank forecasted somewhat more modest 2.3% expansion in 2025, buoyed by strong consumer spending fueled by wage growth, but noted high uncertainty due to anticipated tariff and immigration policies, which if enacted “will likely weigh on growth and leave inflation elevated as the year progresses,” the Board stated.
A major contributor to the economy is construction, which overall exhibited strong growth in 2024. As of November 2024, total put-in-place construction spending amounted to nearly $2 trillion, 6.5% above the spending for the same period in 2023, fueled largely by mega projects, manufacturing investment spurred by reshoring, and building electrification.
This high level of expansion is expected to cool in 2025, however, according to the American Institute of Architects (AIA) Construction Consensus Forecast Panel made up of leading economic forecasters. While major construction indicators ended the year as a mixed bag of caution and optimism, the AIA Construction Consensus Forecast Panel forecasted that nonresidential construction spending will slow to 2.2% growth in 2025 and 2.6% in 2026.
2024 Construction Spending
According to the U.S. Commerce Department, construction spending in November 2024 was estimated at a seasonally adjusted annual rate of $2.15 trillion. During the first eleven months of this year, construction spending amounted to $1.99 trillion, 6.4% above the $1.87 trillion for the same period in 2023.
Private nonresidential construction reached a seasonally adjusted annual rate of $744.5 billion as of November 2024. Private residential construction was at a seasonally adjusted annual rate of $906.2 billion. The estimated seasonally adjusted annual rate of public construction spending was $501.9 billion.
Looking at actual put-in-place construction spending for the first 11 months of 2024, private nonresidential spending grew 5.5% and public nonresidential spending grew 9.5% compared to the same period in 2023. Markets showing significant growth during this period included private manufacturing (+21.2%), private religious (+10.3%), public amusement and recreation (+24.6%), public commercial (+20%) and office (+9.5%). Notable contractionary markets included private lodging (-6.7%) and commercial (-12.2%).
Dodge Construction Network
Issued by Dodge Construction Network, the Dodge Momentum Index’s (DMI) December 2024 score rose to 212, a 10.2% increase over the November score. The DMI is a monthly measure of the value of nonresidential building projects going into planning, shown to lead construction spending for nonresidential buildings by a full year. Over the month, commercial planning increased 14.2% while institutional planning improved 2.5%.
“Commercial activity rebounded strongly in December, thanks to a re-acceleration in data center and warehouse planning activity,” stated Sarah Martin, associate director of forecasting at Dodge Construction Network. “Overall, the strong performance of the Momentum Index this past year is expected to support nonresidential construction spending throughout 2025.”
On the commercial side, data center and warehouse planning drove much of the growth in December 2024, while stronger healthcare and education activity supported the institutional portion. In December, the DMI was up 19% compared to December 2023. The commercial segment was up 30%, while the institutional segment was flat.
Architecture Billings Index
The AIA/Deltek Architecture Billings Index (ABI) is a leading economic indicator of construction activity, providing an approximately nine- to 12-month view into the future of nonresidential construction spending activity. The score is derived from a monthly survey of architecture firms that measures the change in the number of services provided to clients. A score above 50 indicates expansionary business conditions. Below 50, contractionary conditions.
The ABI stayed in contractionary territory for most of the year, ending on a down note as the ABI fell to 44.1 in December 2024 after showing signs of stabilization. Inquiries into new projects continued to increase at a relatively slow rate, while the value of newly signed design contracts decreased further in December.
“While there were signs that the design cycle was bottoming out in the fourth quarter, the December reading indicated a step back,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “There remains considerable uncertainty as to the feasibility of many planned construction projects, so the wait-and-see period is extending into 20-25.”
Firms located in the West reported growth for the third consecutive month in December. All other regions, particularly at firms in the Northeast, reported softer business conditions. Firms with an institutional sector show opportunities for growth, as they have for several months.
Electrical industry confidence
Electrical industry business confidence proved largely positive for much of 2024 but declined in November 2024. In that month, the current conditions component of the National Electrical Manufacturers Association’s (NEMA) Electroindustry Business Conditions Index (EBCI) for North America fell to 60 from the previous month’s 69.2, indicating a softening of confidence but still suggesting business conditions favorable to market expansion.
Panel member comments portrayed mixed sentiments with some seeing an increase in demand, while others noted softening demand. Comments about the recent election results were also mixed, ranging from relief to uncertainty about future policy effects.
General Contractors
Construction contractors are optimistic about certain private-sector segments and have high hopes for most types of public-sector work, according to survey results the Associated General Contractors of America and Sage released in A Year in the Balance: The 2025 Construction Hiring and Business Outlook. At the same time, they have very low expectations for several private-sector market segments, remain concerned about labor shortages, and are worried materials prices will climb amid threats of new tariffs, according to the report.
“2025 offers quite a few bright spots for the construction industry even as the outlook for some private-sector segments remains quite dire,” said Jeffrey Shoaf, the association’s chief executive officer. “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 net reading—the percentage of respondents who expect the available dollar value of projects to expand compared to the percentage who expect it to shrink—is positive for 15 of the 17 categories of construction included in the survey.
The highest net reading, 42%, is for data centers. Contractors are also bullish about the prospects for water and sewer projects (35%), power projects, (32%), non-hospital healthcare construction (27%), hospital construction (24%), manufacturing planet construction (25%), and education (12-13%).
Five other segments have readings that range from moderately positive to negative. The net reading for warehouse construction is 14%, while the reading for multifamily residential construction is 12%. Contractors have a slightly positive net reading, 7%, for lodging. Meanwhile, the net reading for private office construction is -3%, and the outlook for retail projects is -5%.
Association officials noted that contractor expectations are high for a range of infrastructure segments. The net reading for transportation structures, such as airport and rail projects, is 29%. Expectations for bridge and highway work are net 24% positive. The reading for federal contracts, for agencies such as the General Services Administration and the U.S. Army Corps of Engineers, is 22%. One other public category—public buildings—drew a moderately positive net reading of 14%.
“One reason contractors have a relatively positive outlook for many public sector market segments is that more contractors are starting to see the effects of increased federal investments in infrastructure,” said Ken Simonson, the association’s chief economist. He noted that 18% of respondents say they have worked on new federally funded infrastructure projects, double the 9% who said that was the case a year ago.
The construction economist noted that most firms anticipate adding workers in 2025 to accommodate the higher demand for most types of projects. More than two-thirds of the respondents expect to add to their headcount, compared to only 10% who expect a decrease.
AIA Consensus Forecast for 2024
After increasing by almost 20% in 2023 and another 6% in 2024, construction spending for nonresidential buildings is projected to slow in 2025 and 2026, according to the American Institute of Architects’ latest Consensus Construction Forecast, whose panelists expressed a modest outlook on construction spending.
The Forecast expects gains of only 2.2% in 2025 and 2.6% in 2026. Spending on data centers is projected to see the strongest gains of 21.9%, offsetting overall weakness in the office market, with institutional coming in second with expected gains of 6%. The Panel stated that warehouse construction spending, which previously drove retail and commercial growth, is expected to contract due to overbuilding. Healthcare and education spending, meanwhile, is less prone to boom and bust cycles and is now poised for healthy gains.
“The modest outlook is partly based on a few expected headwinds to building activity, including potential tariffs on imports,” said AIA Chief Economist Kermit Baker. “There is also policy concern around how the construction labor force might be impacted by emerging immigration policy. Construction sector spending has been exceedingly strong—albeit unusually unbalanced—and coupled with these headwinds the projections are only very modest gains the next two years.”
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