5 Construction Industry Trends Affecting Your Business and Actions to Take Now to Improve Outcomes

It’s 8:18 a.m., and the firehose has already started.

An owner payment request was rejected because a lien waiver was missing. The project manager just resigned. One of your major projects is trending wildly over budget. Somewhere in the mix? Unapproved change orders, material delivery delays and an ERP rollout that has so far created more disruption than relief. And always simmering in the background: margin pressures from rising costs that never seem to let up.

For today’s construction CFOs, chaos isn’t the exception. It’s the job. In this high-pressure, high-stakes industry, you can’t afford to become complacent — your team’s performance, project funding and cash flow all depend on how quickly and effectively you adapt.

Below are some top trends to anticipate in 2025 and beyond. Taking proactive steps to prepare will help you keep projects (and budgets) on track, make smarter use of your resources and protect your bottom line.

Unsteady Interest Rates Are Stalling and Canceling Projects

Unstable interest rates are disrupting the construction industry, causing significant delays and even project cancellations. With rates continuing to rise or stay high, developers and owners struggle to close new financing, as many projects no longer underwrite favorably. This hesitation to move forward on investments reduces project pipelines, limiting opportunities for new contracts and growth. As a result, cash flow is tightening across the board, slowing progress, increasing risk and making it harder to keep projects on track.

This uncertainty about interest rates also complicates financial planning for projects already underway. While construction loans typically lock in rates upon closing, the broader economic impact is making developers more cautious about committing to future projects. For construction companies, this translates to more time spent managing receivables, fewer projects breaking ground and increased pressure to adapt to a shrinking pool of opportunities.

If left unaddressed, this cash crunch could lead to long-term industry stagnation, causing greater competition for viable projects. Without proactive strategies to diversify your project pipeline and stabilize cash flow, you may face margin pressures and less profitability, which can threaten growth and even day-to-day operations.

How you can prepare

• Diversify project types and financing sources to avoid overreliance on any single market segment. This way, if one area is affected by rising interest rates, you have others to fall back on.
• Proactively manage cash flow by submitting timely invoices and minimizing underbilling.
• Build flexibility into contracts to prevent funding delays.
• Strengthen communication between internal teams, project owners, suppliers and vendors to stay aligned on funding timelines.
• Take advantage of infrastructure investments in transportation, energy and manufacturing. Federal and state funding for these sectors can be a stabilizing force, helping your firm secure necessary resources despite broader economic and regulatory fluctuations.
• Explore creative funding strategies to make projects happen when traditional financing isn’t enough. For example, forming employee pools, where employees contribute money that helps fund deals or projects, can fill financing gaps and keep projects moving. Another option to consider is invoice factoring, a financial transaction where your firm sells unpaid invoices to a third-party factoring company. This strategy provides immediate cash flow and helps you cover expenses without waiting for client payments.

Economic Pressures and Supply Chain Strains Are Squeezing Margins

Construction companies continue to grapple with rising material costs, supply chain disruptions and tariff changes on key materials like Canadian lumber and Chinese steel and aluminum, leading to higher prices, longer sourcing times and limited vendor options. As of Q1 2025, year-over-year prices for fabricated structural steel were up by over 5%, lumber and plywood rose nearly 2% and aluminum mill shapes increased by almost 17%, further straining cash flow and squeezing margins, according to Cumming research.

Companies that leaned into vertical integration, the practice of bringing trades or supply chains in-house to reduce risk, are also reconsidering that investment in light of uncertain costs and supply chain volatility.

Without strong cost controls, expenses can spiral, threatening even the best-planned budgets. All these pressures increase the risk tied to material delays and cost fluctuations and make careful project planning even more critical.

How you can prepare

• Reevaluate vertical integration to ensure it still aligns with your risk strategy and cost structure.
• Regularly review vendor contracts to identify and address escalation clauses, and make sure you have a plan to manage or negotiate cost increases.
• Consider expanding into new domestic regions to spread your risk and mitigate the impact of potential tariffs and other uncertainties.
• Monitor government, economic and industry policy developments and adjust sourcing, operational, labor and market strategies accordingly.
• Build a material inventory when pricing is favorable, and when the benefits outweigh potential backlog risks.
• Double down on accurate and thorough project planning. This can help you get ahead of longer lead times and avoid costly delays or stoppages.
• Revisit your estimating process. Consider investing in modern construction accounting software, construction estimating software and predictive analytics to control job costs and avoid underbidding.

Labor Shortages Remain a Long-Term Challenge

While signs point to a resurgence in trade school interest, it has yet to provide the needed relief for widespread construction labor shortages. A 2024 survey from the Associated General Contractors of America and Arcoro found that 92% of respondents struggle to hire project managers and supervisors, and 94% face difficulties filling hourly craft roles.

The talent shortage has increased subcontractor demand, giving them greater control over job selection and payment terms. To address labor gaps and maximize capacity, some companies are turning to technology, such as drones for site flyovers, to speed up inspections, reduce the need for field staff and help teams accomplish more with fewer resources.

How you can prepare

• Compare your compensation and benefits against competitors to stay attractive to prospective workers.
• Review and refine your recruiting, hiring and training processes to better attract and retain talent.
• Consider implementing an apprenticeship program to develop and retain skilled labor or build your own talent pipeline with a veteran transition initiative.
• Bring in early career talent by increasing your college recruiting presence and offering internships, including opportunities for high school students.
• Make sure you have a robust payroll system. Simplify and automate processes around sub-draw payments to make sure they are timely and accurate.

Technology Adoption Has Become Nonnegotiable

While construction has been slow to adopt tech, companies are rapidly turning to software and automation to complete projects faster and more cost effectively, reducing risks and meeting rising client and stakeholder expectations.

For instance, cloud-based construction software lets employees manage building plans, purchase orders, work hours and job cost estimates from their phone or laptop. Construction leaders are also integrating artificial intelligence applications, from predictive analytics that flag potential delays or cost overruns to automation tools that simplify payment applications, workforce scheduling and documentation.

How you can prepare

• Start with core platforms that address real challenges, such as construction management, procurement, payroll, accounting and finance.
• Make sure your technology integrates smoothly to eliminate double data entry, redundant processes and bottlenecks.
• Train your teams thoroughly on the tools they use and how and why they use them. Offer ongoing software training to help everyone stay proficient and up-to-date.
• Set clear metrics to track ROI and course correct as needed.

Modular Construction and Standardization Are Gaining Momentum

Modular construction and prefabrication are becoming increasingly popular as owners and developers prioritize efficiency and speed. These methods allow for shorter construction schedules, better control over materials and reduced waste.

A key advantage of modular construction is using prefabricated, standardized parts, like wall panels and roof sections. These parts fit together easily across projects, allowing flexible layouts without losing efficiency. Standardization simplifies coordination, reduces onsite labor demands, minimizes delays caused by design changes or material inconsistencies. It also makes costs easier to predict, helping you stay on budget.

The benefits of modular and prefabricated construction are driving investor interest, with funds continuing to flow into companies that specialize in developing pre-built modules, such as additional dwelling units (ADUs).

How you can prepare

• Seek expert advice and strategic analysis of financial, operational, and technological areas to assess whether modular and prefabricated construction aligns with your business model.
• Consider standardization in modular construction and determine whether standardized components and processes can help shape your long-term strategy.
• Communicate the advantages of modular construction to your organization and clients to encourage adoption and differentiate your business.

Don’t Wait for the Next Construction Disruption

Feeling overwhelmed by high interest rates, supply chain volatility and talent shortages? Take control now with practical strategies and solutions from proven experts. Find out how our construction industry consultants can help you build an unshakable foundation for your firm, no matter what challenges lie ahead.