New year, same economy

By Emma Peterson. 

Looking into the new year, learn what economic trends in the industry are predicted to last and what might be changing. 

As we move into the new year, there are a lot of fears and uncertainties about where 2025 might lead us. One of the most pressing things on many contractors' minds is the economic outlook for the new year. To talk about this, Heidi J. Ellsworth hosted Dr. Anirban Basu, chairperson and CEO of Sage Policy Group for an episode of Contractor Outlook™. The Sage Group is an economic and policy consulting firm that serves as the chief economist for many organizations, including the Construction Financial Management Association and the Modular Building Institute. 

Overall, as we move into the new year, Dr. Anirban shared some thoughts on overarching trends for contractors economically. He saw two major directions, “For contractors who are engaged in public work, and especially those specializing in data center construction, whether exterior shells or whatever it happens to be, there will continue to be a construction boom.” He specification of data centers as a sector of growth for the contracting industry is due to the push for artificial intelligence and the support structures needed for that.  

On the other hand, Dr. Anirban sees more workflow issues for those working in private sectors, whether that be commercially or residentially. He shared, “We've seen construction slowdown in the U.S., multifamily segment, meaning if your apartment buildings are under construction, we've seen some slowdown in distribution center, fulfillment center construction and we've seen some slowdown in the traditional office market for obvious reasons, the pervasiveness of remote work.”  

This slowdown can be attributed to many factors, including rising interest and mortgage rates. But a big part of it is uncertainty. Dr. Anirban explained, “The presidential election is behind us, but what we don't have behind us is an awareness of what policymaking is going to look like. What are tariffs going to look like? What are tax cuts going to look like? How inflationary is that? What is going to be the immigration policy?” A lot of this is causing stress both for home/building owners and contractors which is likely to result in a slow-down of construction projects as people watch what will be unfolding in the new year. 

However, even with some of this slowdown, there will still be projects available. One idea that Dr. Anirban pointed to was the rise of what is called “adaptive reuse.” He explained, “A lot of older office buildings are being repurposed. Not all of them can be, but there are going to be a number of opportunities in every market in which some number of properties can be converted.” By converted, Dr. Anirban is referring to the trend of turning things like old office buildings into apartments, rather than demolishing and building from the ground up again. And so, for the contractors in the private sector, he has been recommending looking into this and seeing where it fits into their business.  

Read the transcript, Listen to the conversation or Watch the episode to learn more about Dr. Anirban’s economic predictions and observations.