Each year for the past decade or so, we have provided our construction outlook for the new year. It is interesting to review the older versions as it provides insights into the changing market conditions and the key drivers of the macroeconomic trends. Our outlook for the past couple of years has been marked with a tone of cautiousness and uncertainty. This year, while those sentiments are still present, there is a new sense of optimism for the CRE business in general.
In the logistics and distribution sector, construction activity is both driven and tempered by many economic factors. Elevated interest rates have raised borrowing costs for developers, this generally has slowed the pace of new project starts. This was not unexpected, particularly considering the rapid growth driven by the pandemic. However, we are still seeing persistent demand for strategically located industrial facilities, fueled by e-commerce growth and supply chain optimization. Vacancy rates in key logistics hubs remain low, pushing developers to proceed with new construction to meet demand. This delicate balance underscores the importance of market analysis and financial planning for stakeholders aiming to capitalize on these opportunities.
At Alston, our Preconstruction group has been very active in pricing new development activity, and “refreshing” project budgets for projects that were placed on hold 12-18 months ago. This has fueled our optimism and belief that it bodes well for the solid growth in the second half of 2025. The new administration and potential geopolitical developments may bring about significant changes that could impact our industry. This includes new guidelines, trade tariff initiatives, and economic policies that may influence commodity pricing and the broader market. To stay ahead, Alston is proactively assessing these factors and engaging our designers, subcontractors, suppliers and other vendors to develop strategies to mitigate risks, leverage opportunities for our clients and keep project stakeholders informed of potential changes in the market landscape.
Technology is also reshaping the construction landscape in profound ways. From advanced building information modeling (BIM) to virtual design and construction (VDC), companies are leveraging digital tools to enhance efficiency, reduce costs, and improve project outcomes. VDC is transforming how projects are planned and executed by integrating 3D modeling with real-time data and collaborative platforms. This approach enables better decision-making, minimizes errors, and fosters coordination among stakeholders.
The integration of artificial intelligence (AI) and machine learning is further streamlining operations, enabling predictive maintenance, and optimizing resource allocation. These innovations are not only driving productivity but also helping firms address the persistent labor shortages that have challenged the industry for years.
The construction of cold storage facilities, data centers, and manufacturing projects is expected to significantly contribute to the overall volume of U.S. construction in 2025. The rise of e-commerce and demand for temperature-controlled logistics are driving the need for modern cold storage infrastructure. Similarly, the ongoing digital transformation across industries has spurred the rapid expansion of data centers, requiring specialized construction techniques and robust energy solutions.
Meanwhile, the reshoring of manufacturing operations to the U.S. is creating demand for advanced production facilities that meet modern efficiency and sustainability standards. Collectively, these projects are shaping the landscape of industrial construction and boosting activity across multiple regions.
In conclusion, 2025 promises to be a pivotal year for the U.S. construction sector. By embracing innovation, addressing workforce challenges, and focusing on high-demand industrial projects, the industry is well-positioned to meet the demands of a rapidly evolving market. As stakeholders across the value chain collaborate to build resilient and forward-looking infrastructure, the opportunities for growth and transformation are boundless. At Alston, we look forward to serving our broad base of trusted clients and partners to deliver a foundation for a stronger, more dynamic future.