In 2025, construction spending is expected to continue its upward trajectory—but with a tempered pace compared to previous years. While the industry remains a critical engine of economic activity, shifting market dynamics, interest rates, and supply chain recalibrations are contributing to a more cautious outlook across all sectors.

Here's what you need to know about the forecasted construction spending growth in three key segments: Civil, Residential, and Nonresidential.

1. Civil Construction: Steady Growth Through Infrastructure Investment

Thanks to ongoing federal infrastructure funding and a renewed focus on climate-resilient projects, the civil sector is expected to see consistent growth. Roads, bridges, water systems, and public transit are at the forefront of this investment wave.

• What's driving it? The Infrastructure Investment and Jobs Act continues to inject billions into transportation and utility upgrades, especially in underserved regions.

• Outlook: Growth in this sector is projected to remain positive, albeit modest, as projects move from planning into active development.

2. Residential Construction: Slowing, But Still Strong

Residential construction, which surged during the pandemic-era housing boom, is now experiencing a cooling period. High interest rates and affordability challenges are slowing the pace of new single-family developments. However, multifamily and build-to-rent projects are picking up the slack in many urban and suburban markets.

• What to watch: Homebuilder sentiment is cautiously optimistic. While custom home starts may decline, demand for energy-efficient homes and renovations remains robust.

• Outlook: Residential construction will continue to grow, but at a slower, more normalized rate compared to the explosive gains of 2021–2022.

3. Nonresidential Construction: Rebalancing and Repositioning

The nonresidential building sector—comprising office buildings, retail, healthcare, education, and industrial spaces—is undergoing transformation. Remote work trends have reshaped office space demand, while warehousing and data centers remain hot markets due to e-commerce and tech growth.

• Shifting trends: Adaptive reuse and conversions (like turning office buildings into housing) are becoming more common as developers rethink space utilization.

• Outlook: Overall growth in nonresidential is expected, but with wide variation between subcategories. Healthcare and manufacturing facilities lead the pack, while traditional office construction lags.

What It Means for Industry Pros

For developers, contractors, and investors, the message is clear: construction is still growing, just more selectively. It’s no longer about rapid expansion—2025 is about smart, strategic building.

• Diversification will be key. Companies with a balanced portfolio across residential, nonresidential, and civil projects will fare best.

• Innovation in construction methods and materials will offer a competitive edge.

• Resilience—in both planning and execution—will be critical as the market adjusts to new economic realities.

Final Thought

In 2025, the future of construction isn't always building new—it's building smarter. The trend toward conversions and demolitions signals an evolving landscape where flexibility, creativity, and sustainability take center stage.

Stay ahead of the curve. Explore how TeaBow Residential is adapting to these changes and helping our partners do the same.

Watch Exclusive Content on Our Youtube Page @TeaBowResidential

Upcoming Events