Construction Industry Trends to Watch (2025-2028)

The construction industry is entering a transformative phase, shaped by global economic pressures, technological advancements, and shifting environmental priorities. From new steel tariffs in 2025 to the rapid rise of AI, robotics, and modular construction, businesses in the sector will need to adapt quickly to stay competitive. Understanding these changes is essential not only for large contractors and developers but also for small and medium-sized construction firms aiming to thrive in a challenging environment.

This guide highlights the key construction industry trends 2025 to watch from 2025 to 2028. We’ll explore how economic shifts like inflation and tariffs affect project costs, how technology like drones and 3D printing is reshaping workflows, and why sustainability and green building practices are moving from optional to essential. By the end, you’ll have a clear roadmap of what’s coming next in the industry—and how to position your construction business for growth and resilience.

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Source: Freepik

Trump’s 2025 Steel Tariffs

The big headline this year is steel. In February 2025, the White House enacted 25% tariffs on imported steel and aluminum, and according to Steel Industry News, by June those tariffs doubled to 50% on most imports.

If you’re a contractor, you’ve already felt it. Jobs that would have been profitable a year ago are now running close to the line. Developers used to allow about 5% wiggle room for material costs. Now, they’re budgeting 15–20% just to cover surprises.

That matters when you’re bidding. If you’re not padding estimates enough, you could end up eating costs. On the flip side, price too high and you’ll lose the job. If you need a refresher on how to run numbers, this guide to estimating construction jobs can help you sharpen your approach.

Source: Site Selection Group

Residential Construction vs Commercial Construction

Tariffs and high interest rates are hitting housing harder than other markets. In March 2025, housing starts dropped to 1.324 million units, down 11.4% from February according to Steel Industry News. That slowdown makes sense when you look at mortgage rates — families are hesitant to take on new builds when borrowing is expensive

Commercial construction is a mixed bag. Office buildings are still struggling because remote work is here to stay. But demand is strong in manufacturing plants and data centers, especially with the government backing projects through the CHIPS Act.

So what does this mean if you run a small construction company? In short: don’t put all your eggs in the housing basket. Homes will keep moving, but at a slower pace. Meanwhile, commercial projects linked to manufacturing, industrial growth, or public infrastructure may be steadier bets. If you’re just getting started, this step-by-step guide to starting a construction company can help you figure out where to point your energy.

To make it clearer, here’s what the latest forecasts show for each major sector.

Forecast Construction Spending Chart

Sources:

• Residential & Commercial: AIA Consensus Forecast July 2025
• Infrastructure: Deloitte 2025 Construction Outlook and Nationwide Mid-Year 2025 Report
• Industrial: Deloitte 2025 Construction Outlook

What the chart tells us: Housing and office projects will grow, but slowly. Infrastructure and industrial are the real growth engines through 2028, thanks to federal funding and the surge in data centers.

For a small builder, that could mean more opportunity bidding on public works projects, industrial retrofits, or commercial specialty trades than just chasing residential builds. And if you’re estimating jobs in any of these areas, it’s worth brushing up on best practices — this step-by-step guide to construction estimates can help you stay accurate and profitable.

Steel Markets Booming

Steel mills in the U.S. are busier than they’ve been in years. The American Iron and Steel Institute reports that production in mid-2025 hit its highest point in more than three years, with output running about 5% higher than last year. Mills in the Midwest and South are adding jobs to keep up.

That’s great news for steelworkers, but tougher for builders. Fabricators are backed up, and shipments of rebar, sheet steel, and beams are taking longer to arrive.

If you run a small construction company, the takeaway is simple: give yourself extra time on projects and be honest with clients about possible delays. It’s better to manage expectations than risk losing referrals by missing deadlines.

HVAC & Water Heaters On The Rise

There’s one corner of the market that’s holding steady: HVAC systems and water heaters. With new efficiency standards and homeowners looking to cut energy bills, these products are hot right now. Retrofits and upgrades are keeping many contractors busy even while housing starts cool off.

If residential new builds are down in your area, consider offering green retrofits. Adding HVAC installs or water heater replacements to your construction services list can keep crews working year-round.

2025-2026 Macroeconomic Outlook

Zooming out, what’s the bigger picture? Analysts say 2025 is a year of transition. Deloitte expects interest rates to gradually decline after the Fed’s 2024 cuts. That could bring homebuyers back by late 2025.

At the same time, the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) are pumping billions into roads, bridges, and clean energy projects. That means steady work in heavy civil engineering and renewable construction.

Nationwide’s mid-year report notes that overall construction spending has “leveled off” but hasn’t collapsed. The message for small businesses: be cautious but not fearful. Diversify your project types and don’t rely on just one revenue stream.

Source: Monitor Daily

Construction Companies Embracing AI

If there’s one buzzword you’ve heard this year, it’s AI. And it’s not just hype. According to Wipfli 2025 State of Tech in Construction, 82% of U.S. construction firms say they already have an AI strategy/

AI can do a lot: track progress on your site, predict delays, even monitor safety risks. For example, Buildots creates a virtual map of your site and uses cameras to compare progress against your plan. That kind of tool can cut delays by 50%and reduce safety incidents by 25%.

You don’t need to be a big firm to take advantage of AI. Even small contractors can use apps to streamline scheduling, invoicing, and project management. If you’re curious about tools, check out the best apps for construction that are worth trying in 2025.

Virtual Construction Market Is Growing Rapidly (VDC& BIM)

Another major shift is the rise of Virtual Design and Construction (VDC) and Building Information Modeling (BIM). These aren’t just for big jobs anymore. BIM lets you and your clients see the project in 3D before you break ground, which saves time and arguments later.

A Springer study shows BIM can shorten timelines by 20% and cut costs by 15%. For small businesses, that means fewer change orders and more predictable profits.

Prefabricated & Modular Constructions Change The Way Of Building

Prefab and modular building methods are going e becoming mainstream. Instead of building everything on-site, large sections of a home, hotel, or even a hospital are built in a factory, then shipped and assembled.

The global modular construction market was worth $104 billion in 2024 and is expected to reach $141 billion by 2029 according to MarketsandMarkets. Contractors like these methods because they shorten schedules, lower costs, and reduce waste. McKinsey has found modular projects can be completed 20–50% faster than traditional ones.

For small businesses, this matters because more general contractors are demanding subcontractors who understand prefab systems. That could mean new work opportunities if you’re ready to adapt.

Smart Cities Change The Way Cities Are Structured And Organized

Smart cities” may sound futuristic, but they’re already happening. These are cities where buildings, roads, and utilities are connected with sensors to collect and share data. The goal: more efficient, cleaner, and safer communities.

The global smart city market is valued at $877 billion in 2025 and could grow to $3 trillion by 2030. Big projects like Saudi Arabia’s NEOM have already spent more than $50 billion building futuristic infrastructure.

For contractors, this trend means demand for tech-ready infrastructure like fiber networks, EV charging stations, and energy-efficient HVAC systems. Even if you’re not working overseas, U.S. cities are already requiring more IoT-friendly systems in new builds.

Improvement in Environmental Issues Thanks To Green Building

Green building is quickly becoming the norm. Builders are under pressure from clients, cities, and regulators to lower carbon emissions and build more sustainable homes and offices.

Demand for green buildings is climbing. A study in Sustainability looked at 13 years of data from the Top 100 U.S. green building contractors and found revenues have been rising steadily every year. In addition, the NAHB Green Building Survey notes that about one-third of builders already report at least half their projects use green practices.

For small companies, the low-hanging fruit is energy efficiency. Even simple steps like better insulation or Energy Star windows can make your bids stand out.

Source: Grand View Research

Drone Technology Benefits The Construction Industry Heavily

Drones aren’t just for cool jobsite videos anymore. They’re saving contractors real money. Using drones to survey stockpiles or inspect roofs has been shown to increase accuracy, lower cost and save time according to PwC. 

They also improve safety. In the U.S., construction still accounts for 1 in 5 workplace deaths according to the BLS. By using drones for inspections, companies can cut down on risky climbs and site visits.

For small builders, drones may sound expensive, but affordable models now cost less than a laser scanner. That means better bids and safer sites without breaking the bank.

Workplace Safety Increase Thanks To New Technologies

Safety gear is also getting an upgrade. Traditional hard hats are being replaced with safety helmets that strap on like climbing helmets. They provide better head protection and stay on during a fall.

Wearable devices are another growing trend. Smart vests and goggles can track heart rate, posture, and even alert managers if a worker falls. The U.S. construction industry loses over 1,000 workers a year to fatal injuries, so every step forward matters.

For a small business, even adopting one or two new safety tools can lower insurance premiums and keep crews healthy, which means fewer delays and lower turnover.

Construction Robotics & Automation Increase Productivity

Robots aren’t replacing workers, but they are helping fill the labor gap. Machines like the TyBOT, which ties rebar automatically, can handle 1,100 ties per hour, giving crews a 40% productivity boost.

Other robots like Dusty Robotics’ FieldPrinter can mark layouts on a slab 10 times faster than a traditional crew with chalk lines.

For small contractors, this might sound out of reach, but many larger GCs expect subs to work alongside robotics in the next decade. Learning how they fit into your workflow could be a competitive edge.

Top 5 Emerging Construction Technologies (2025)

3D Printing For Building Models

3D printing is quickly becoming one of the most exciting construction technologies. Instead of spending weeks on framing and masonry, a giant printer can lay down layers of concrete to create a house in just days.

California-based Mighty Buildings has delivered entire 3D-printed homes in about 8–12 weeks, often cutting construction time in half compared to traditional methods. Another company, ICON in Texas, says its printers can build a 650-square-foot house in just 24 hours. These projects show how fast this technology is moving from experimental to practical.

For smaller contractors, 3D printing is still pricey and usually limited to large firms or special projects. But costs are coming down every year. It’s worth watching closely — once the price drops and more builders adopt it, 3D printing could totally change how homes and small buildings are built, making projects faster, cheaper, and less labor-intensive.

Final Thoughts about Construction Industry Trends 2025

The construction industry between 2025 and 2028 is going to look very different from what we’re used to. Housing will recover slowly, and offices may never bounce back to pre-2020 levels. But the real growth will come from infrastructure projects, industrial plants, and tech-driven builds like data centers and smart city upgrades.

For small construction companies, this means two things:

Stay flexible. Don’t rely on just one sector — explore opportunities in public works, modular builds, or green retrofits.

Use technology to your advantage. From AI scheduling to estimating software, the right tools can help you compete with larger firms.

Bottom line: the future of construction is here. Those who adapt to new technology, focus on growing sectors, and keep their finances in order will not just survive — they’ll thrive.

And remember, growth is only as good as your cash flow. If you’re not billing on time or tracking payments, you could win a big project and still come up short. That’s why tools like Invoice Fly’s Invoicing Software and Invoice Maker are a must-have for contractors who want to get paid faster and keep projects running smoothly.

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