The construction industry is currently navigating a complex and dynamic landscape. Several contributing factors contribute to its unique state; however, it is still poised for growth. Developers and contractors are working through the challenges, illustrating tenacity and determination to see projects completed. Construction continues to move forward, even when obstacles exist.
The construction industry experienced significant growth in 2023 and 2024. This growth was attributed to a rebound effect from the downward turn during the pandemic. There has been a slowdown in 2025; however, there is still momentum, and several non-residential sectors are poised for growth. Specifically, institutional sectors are projected to have a 6% gain in 2025.
For 2025, the 1 American Institute of Architects (AIA) projects that there will be a modest increase of 2.2% in non-residential construction. This is a slower rate of growth than what has been seen in previous years; however, there was an unprecedented rebound in construction activity post-COVID. 2 The Construction Confidence Index (CCI) for April rose to 61, marking a 6-point increase from the previous month. The CCI is a metric that is used in a survey completed by Associated Builders and Contractors (ABC). When the index is above 50, it indicates optimism amongst the contractors; when it dips below 50, it is a pessimistic outlook. Despite tariff impacts, contractors’ expectations for the next 6 months are optimistic with a strong backlog. The backlog for April rose to 8.7 months, the highest level in 20 months. The southern states have the lengthiest backlog of 10.3 months, which is a good indicator of where the development growth is occurring in the nation.
With the tariffs and higher interest rates, many investors are in a “wait and see” state, which is creating an excellent advantage for those who don’t want to sit on the fence. While others are waiting and navigating potential risks, it presents opportunities for those who decide to move forward with their projects. This allows for less competition for land purchases and shorter timeframes to get jurisdiction approvals. Also, when less development occurs in specific construction sectors, this creates a space for competitive pricing from contractors eager to keep their backlogs comfortable.
Beyond the increased cost of materials due to tariffs and the unattractive interest rates, the construction industry also faces a labor shortage. This remains a critical issue for contractors nationwide. 6 ABC’s Chief Economist, Anirban Basu, shares, “While the construction workforce has become younger and more plentiful in recent years, the industry still must attract 439,000 new workers in 2025 to balance demand and supply.” The main factors contributing to the shortage in labor are an aging workforce moving into retirement, immigration policies, and the perception of trades. This labor shortage directly impacts construction projects with schedule delays, increased cost of labor due to low supply, and safety concerns with overworked crews. 7 It is projected that there will be an even greater need for labor in 2026 as interest rates are anticipated to fall, increasing construction development projects.
3 The self storage industry is experiencing a peak in supply, with construction completions forecasted to add 54 million square feet of storage in 2025. For 2026, the new self storage supply is projected to be 20% less than this year. Despite this, several markets are still seeing a continued increase in new or expanding self storage facilities. These trends typically follow the growth trends of people moving or “migrating” to specific markets. With several markets facing an oversupply of self storage, many investors are pivoting to an asset class that is similar, flex space.
4 There is an unprecedented demand for small-bay flex space. The combination of limited supply, increasing demand, and strategic locations makes this segment very attractive to investors and developers. This type of real estate appeals to small and mid-sized companies, such as contractor trades, light manufacturing, automotive services, fitness studios, small retailers, and wholesalers. Small-bay flex units typically range from 1,500 SF to 10,000 SF. The tenants who rent these spaces are not looking for a large commercial warehouse but need space to conduct business.
Despite current industry challenges, Forge Building Company is well-positioned to respond with strength and expertise. Its steel building packages for development projects remain competitively priced, supported by a dependable network of skilled installation crews that help mitigate schedule delays. With specialized knowledge in both self storage and flex space, Forge can value-engineer projects to keep development costs in check. While some investors adopt a cautious “wait and see” approach, others are seizing the moment, proving the adage true: When others wait, builders gain.
Contributing Editor: Melissa Anderson, Forge Building Company
References:
1 https://www.aia.org/about-aia/press/softness-construction-spending-predicted-through-2026-consensus-construction
2 https://www.abc.org/News-Media/News-Releases/despite-tariff-impacts-abc-contractors-backlog-and-profit-margin-expectations-improve-in-april
3 https://www.multihousingnews.com/top-emerging-self-storage-markets/
4 https://www.globest.com/2025/04/07/small-bay-industrial-emerges-as-attractive-investment-amid-e-commerce-boom
5 https://personalwarehouse.com/small-bay-industrial-trends-micro-flex-market-booming-2025
6 https://www.abc.org/News-Media/News-Releases/abc-construction-industry-must-attract-439000-workers-in-2025
7 https://www.enr.com/articles/60213-construction-needs-over-439-000-new-workers-in-2025-says-abc
