As we move into 2025, understanding the trends and factors affecting the built environment is more important than ever. Not all sectors, geographies, and business models will see the same outcomes. Gaining insight into what is likely to shape your strategy will be critical for success in the latter half of this decade.

There are many factors influencing how construction spending will close out the decade, including the current political climate, policy and funding shifts, and changing priorities across sectors. While we cannot predict the future, there are several areas that will likely have an outsized impact on construction spending.

Following are four of the most important trends that will shape engineering, construction, and other areas of the built environment in the coming years. We at FMI also offer some questions for executives to consider when looking to understand the operating environment and how to make strategic decisions that will drive long-term results.

 

TREND 1

Increases in data centers and reshoring of manufacturing facilities are driving engineering and construction (E&C) growth.

Spending on data centers is forecast to reach more than $30 billion by 2026, with an annual growth rate of more than 10% through 2026.

Private data center spending, which is a subset of the broader office sector, rose 60% from 2023 levels through the third quarter of 2024. New inventory grew by more than 20%, driven by surging demand for artificial intelligence (AI) and cloud computing. Spending on data centers is forecast to reach more than $30 billion by 2026, with an annual growth rate of more than 10% through 2026.

But it is not enough to quickly assemble a metal building on a concrete slab and add servers. The design and construction of data centers are changing to incorporate increased demand and new trends in the industry, such as the need to be more energy efficient. Since data centers consume 10 to 50 times the energy of commercial office buildings, owners are looking for energy-efficient solutions. This is especially true for hyperscale data centers because many large technology companies pledged to reduce their carbon emissions and integrate sustainability into their operations.

The rise in data centers is also changing how electricity is produced and how much it costs. Data centers use an estimated 2% of the total electricity consumed in the United States¹, and this use is expected to grow. That means upgrading transmission and distribution infrastructure is essential to meeting demands. Strategic investments in smart grids, energy storage, and grid flexibility allow electrical providers to effectively address the evolving requirements of electrification, support clean energy initiatives, and achieve emissions reduction targets while ensuring reliable and sustainable power supplies.

Because transmission and distribution lines already carry substantial energy loads, and substations are often located on the outskirts of urbanized areas, there is a clear need to prioritize upgrades, maintenance, and restoration work on the electrical infrastructure. The lack of capital and necessary labor force coupled with the extensive timelines for major transmission projects further emphasizes the need to efficiently and intelligently expand the grid. Power system engineering providers and software solutions sit at the forefront of this massive development effort.

Besides data centers, construction spending will be driven by manufacturing. In October 2024, manufacturing construction spending reached $236 million², up 16.6% from the year before, according to the U.S. Census Bureau. The Covid-19 pandemic highlighted supply chain risks and other gaps in U.S. manufacturing, prompting many companies to begin moving production to the United States. The risk of tariffs and other trade policy changes is also pushing many to build greater flexibility into their procurement strategies to help navigate uncertainty and diversify supply chains.

Critical questions to ask yourself:

• The continued data center builds to support AI are driving up the demand for power and the price of electricity. How does this impact traditional energy efficiency efforts?
• What happens after the federal stimulus program money is spent, especially given the transition toward smaller government spending and initiatives?
• What constraints are data centers putting on your business, including access to skilled labor, material procurement, transportation logistics, etc.? How can you work to combat these challenges?
• What strategies are you employing to integrate sustainability and resilience into your projects, ensuring you meet both regulatory requirements and client expectations in a rapidly evolving market?

 

TREND 2

Long-term efficiency and sustainability implications are reshaping how our world is built.

The U.S. Government is mandating that state departments of transportation develop climate resiliency plans to qualify for federal funding and designated more than $50 billion to enhance climate adaptation and resilience nationwide.

As FMI wrote in our paper, “The Seven Biggest Trends Affecting Infrastructure Today³,” the movement to reduce the United States’ carbon footprint is driving significant investment allocations in renewable energy infrastructure and the grid, sustainable transportation systems, and low-carbon construction materials and building products. In fact, investments in clean energy technologies in the United State are expected to surpass $300 billion⁴ in 2024, outpacing fossil fuel investment by a factor of two. Looking beyond mandates and sustainability goals that are driving these investments, renewable energy generation costs have declined considerably, allowing them to frequently compete with or surpass new fossil fuel plants. Technological advances and large-scale production have facilitated these reductions, making renewables highly competitive.

The Energy Information Administration is forecasting a substantial increase in the use of renewables, with solar energy capacities expected to grow by 128% over a 3-year period ending in 2025, and wind energy infrastructure expected to expand by nearly 15% in the same period⁵.

While we expect this shift to continue long-term, the new administration’s stance on specific initiatives and certain companies pulling back on environmental, social, and governance commitments, will likely bring potential setbacks in the adoption of renewable energy. This is something that the industry has continuously faced over the past decade, while continuing to outpace projected growth. Long-term, however, the rising cost of electricity and the need to find cost-cutting measures across the energy spectrum will continue to push new sources of generation across the board.

Adding to the shift in energy sources is the movement of more people to cities. Those living in cities and surrounding suburbs made up about 83% of the U.S. population in 2020, up from 64% in 1950. This urbanization trend is expected to continue, with 89% of the U.S. population expected to live in cities by 20506.

The continuing population shift from rural areas is expected to challenge the capacity of transit systems, roadways and utility systems in developed areas, driving the need for further infrastructure investments and increasing subsequent development, engineering, and construction activity. This population shift puts increasing pressure on an already overburdened and aging infrastructure base, which will require investments in maintenance and repairs just to keep up with the status quo.

The United States is also dealing with rising costs from natural disasters and shifting investments to infrastructure that can withstand extreme winds, water, fire, and other events. The U.S. Government is mandating that state departments of transportation develop climate resiliency plans to qualify for federal funding, and designated more than $50 billion to enhance climate adaptation and resilience nationwide, particularly in communities most vulnerable to flooding, wind damage, and other extreme weather.

This mandate will shift where states invest and how they design, bid on, and execute projects. Stakeholders will also likely see increased demand for projects to fortify roads, bridges, and other structures against extreme weather events, rising sea levels, and other climate-related risks.

The enhanced focus on addressing aging U.S. infrastructure—and a funding influx and numerous high-priority initiatives—present an opportunity for those ready to capitalize on the trends.

Ask yourself:

• Will the threat or implementation of tariffs impact the supply chain or cause elevated inflation? Or will it result in a strengthening of the dollar and have a limited impact on domestic spending?
• How will the pace and shape of the energy transition change under the new administration?
• How do changes in federal administrative regulations impact companies in the built environment?
• To what degree are corporations comfortable resisting pressure from the new administration to stick with long-term sustainability goals?

 

TREND 3

Companies that put workers first are solving key labor challenges.

It takes dedicated leadership who are committed to empowering their employees to manage their careers. This is a critical piece of the puzzle in solving for labor constraints.

It is time to shift our thinking about labor in construction. Labor is and always will be a constraint on E&C firms, whether you are building a road, a data center, or a multifamily unit. What we have learned over the years working with clients is that companies not experiencing labor issues put workers at the forefront of all their decisions.

Our nonresidential construction index survey this quarter tackled labor questions, finding that 38% of respondents expect to somewhat increase hiring, and 41% plan to keep it about the same as 2024 levels. Most survey respondents plan to keep project staffing for field and skilled labor, project management, and estimators and office functions the same as in 2023, but that still indicates that companies need to hire workers across the project spectrum.

The open-ended responses to our survey questions revealed many of the reasons hiring remains a challenge, such as the increase in revenue and backlog, growing project size, the need for greater oversight of poorly executed project documents, constraints from immigration policies, growing competition, and project delays causing strain on skilled labor. While the challenges may vary by company, contractor type, or region, the need remains the same: replace departing workers and hire the right people to execute your project pipeline.

But as we all know, it is not enough to hire workers. You need to train and develop these individuals to keep them engaged. Companies with clear pipelines for developing talent, whether it is field leaders or those expected to take on roles in the C-suite, understand that putting power and decision-making capabilities into the hands of those who are best equipped to execute the work helps streamline operations and fuels employees’ job satisfaction.

Companies that have the right mix of competitive compensation, comprehensive benefits, meaningful work, and talent development programs, along with clear management succession plans, are attracting and retaining the best workers and seeing more growth compared to their peers. It takes dedicated leaders who are committed to empowering their employees to manage their careers. This is a critical piece of the puzzle in solving for labor constraints. You can take action to position your company for the future, craft a talent strategy that supports your performance and goals, and ensure you have a clear path to success.

Ask yourself:

• Do you and your team have a clear and compelling vision for your organization?
• Have you effectively communicated your vision and how your team members contribute to that success?
• Are your leaders prepared to lead in today’s operating environment?
• Are you proud of every aspect of your culture, and are you leading effectively?

 

TREND 4

Companies that leverage digital tools are boosting operational efficiency and profitability in construction.

Aligning strategies with the right technology and data, including AI solutions, is crucial to achieving business goals.

Technology continues to transform the way we work, especially in the built environment. From building information modeling, which enhances constructability and coordination, to advanced analytics powered by AI, which optimizes project planning and supply chain management, the opportunities for increased efficiency are unparalleled. Autonomous job sites are redefining logistics, materials management, and manpower allocation, while robotics installations deliver unmatched precision, reducing both time and costs. These innovations are reshaping the construction lifecycle, driving significant productivity and profitability gains.

However, technology is only part of the solution. To unlock its full potential, companies need a clear business strategy aligned with a comprehensive data and technology roadmap. A successful transformation begins with understanding the “why” behind technology investments and developing a well-defined, actionable plan to help you achieve measurable results.

To develop a clear strategy, you need to ensure your workforce fully understands every project. In your leadership role, you need to understand your employees’ depth of expertise, their current challenges, and what it will take to empower them to adopt advanced tools. And technology adoption is not just about tools; it is about giving your teams the tools and information needed for long-term growth and success. By addressing these fundamentals and combining digital tools with improved processes, companies can ensure that technology enhances collaboration, efficiency, and profitability.

Digital transformation is not a one-time event; it is a continuous, proactive journey. Every individual in the company must be involved and guided by a shared vision and direction. Success demands a structured, ongoing effort to implement, refine, and update tools and processes that grow alongside your team and your business.

Aligning strategies with the right technology and data, including AI solutions, is crucial to achieving business goals. From project selection and preconstruction to cost estimating and post-job reviews, operational excellence hinges on disciplined process improvements that empower teams to adapt, grow, and sustain long-term success.

Key questions to consider:

• What tools do you have that can drive productivity, and what obstacles prevent
  you from fully leveraging them?
• How can you ensure your people have the right technology and processes to maximize efficiency and performance?
• What is your strategy for aligning technological investments with your long-term business objectives and operational road map?
• How can you leverage data, AI, and other digital tools better to improve decision making and streamline key processes like preconstruction and project delivery?
• What metrics will you use to measure the success of your digital transformation, and how will you refine your approach based on the results?

What it Means for You

The built environment is entering a transformative era, shaped by rapid technological advancements, shifting economic dynamics, and an evolving regulatory landscape. From the rise of AI-driven tools to the increasing demand for sustainable solutions, the forces driving change are vast, complex, and interconnected.

For executives, the challenge is not just to react but to anticipate and strategically position their organizations to thrive. The questions raised throughout this article serve as guideposts— prompting leaders to evaluate their approaches to labor shortages, digital transformation, and energy transitions. The organizations that embrace adaptability, invest in their people, and leverage innovation will be the ones that define the future of our industry.

As we move into 2025 and beyond, one thing remains clear: Success will belong to those who can connect long-term vision with decisive action. Now is the time to seize the opportunities ahead, challenge conventional thinking, and build a foundation for sustained growth and impact.

References:
1. https://www.energy.gov/eere/buildings/data-centers-and-servers
2. https://www.census.gov/construction/c30/pdf/release.pdf
3. https://fmicorp.com/insights/industry-insights/the-seven-biggest-trends-affecting-infrastructure-in-2025
4. https://www.iea.org/news/investment-in-clean-energy-this-year-is-set-to-be-twice-the-amount-going-to-fossil-fuels
5. https://www.eia.gov/todayinenergy/detail.php?id=61242
6. https://css.umich.edu/publications/factsheets/built-environment/us-cities-factsheet#%3A~%3Atext%3D83%25%20of%20the%20U.S.%20population%2Cto%20live%20in%20urban%20areas