2025 Construction Trends: Costs, Labor, Growth
In 2025, the national construction industry is experiencing both robust demand and mounting pressures. Growth is fueled by natural disaster recovery, infrastructure investments, and rapid expansion of tech-driven projects such as data centers and pharmaceutical facilities. At the same time, the sector is challenged by material tariffs, shifting energy policies, and ongoing supply chain instability.
Labor shortage remains one of the most pressing issues, with 78% of firms struggling to fill hourly craft positions. This challenge is further compounded by potential labor strikes, immigration enforcement, and heightened wage competition.
Material costs also reflect volatility, tariffs on imported steel, aluminum, and wood can represent up to 30% of project costs, though easing energy prices may help offset some inflationary pressure.
While the industry faces headwinds from labor and supply constraints, demand from infrastructure, technology, and disaster recovery projects is expected to drive continued growth, positioning 2025 as a year of both opportunity and challenge for construction.
Key Composite Categories, Main Drivers & Regional Fluctuations
Over the past year, construction costs have shown steady upward momentum, influenced by both material and labor markets, although trends varied by category.
Returned Claim Values: The average returned claim value demonstrated significant volatility. After a sharp 12% decline in July 2024, values rebounded strongly and reached a peak increase of 35% in January 2025. While there has been some moderation since then, claim values remain elevated compared to mid-2024, indicating overall growth despite short-term fluctuations.
Overall Costs: Broader cost trends tracked through the Basket of Goods Estimate, which measures 75 widely used construction materials, reflect consistent increases. From May 2024 to May 2025, total costs climbed 3.9%, rising from $83,379.14 to $86,635.02. The steepest growth occurred between February and May 2025, underscoring sustained inflationary pressure on construction inputs.
Materials: Year-over-year material costs showed broad but uneven increases. Concrete Composites surged by 9.3%, the most substantial rise and a clear outlier among material categories. Other materials, including Roofing (2.8%), Drywall (2.3%), and Paint (2.0%), posted moderate gains, while Metal Roofing (1.6%), Carpet (1.5%), and Interior Trim (1.0%) saw smaller increases. Lumber Composites remained flat, showing 0.0% change. Overall, while most categories contributed to higher costs, the significant escalation in concrete pricing was the dominant factor in material inflation.
Labor: Labor costs also trended upward, though increases were highly uneven across trades. Concrete Masons experienced a 25.0% surge, far exceeding any other category and driving most of the labor-related cost growth. The second-largest increase was among Drywall Installers/Finishers at 6.1%, while other skilled trades such as Plumbers (3.8%), Electricians (3.3%), Heating/AC Mechanics (3.2%), Roofers (2.6%), and General Carpenters (2.6%) posted moderate rises. Steel Workers saw the smallest change, with a 1.7% increase.
In summary, between May 2024 and May 2025, construction costs were shaped by steady material price growth and selective but sharp labor increases. While most categories saw modest inflation, concrete, both in materials and labor, emerged as the most significant driver of cost escalation, creating heightened pressure on overall project budgets across the industry.
Urban and Rural Differences
Regional Fluctuations – Residential
Residential reconstruction costs rose 4.7% nationwide in 2025, with all states seeing increases. Kansas (+6.95%), Oregon (+6.81%), and Georgia (+6.53%) led the nation. Georgia also surged in rank from 17th to 3rd, while Louisiana, Wisconsin, and Massachusetts posted notable gains. Conversely, Tennessee and Mississippi dropped in rank despite moderate increases. Overall, costs rose everywhere, with the steepest pressures in the Midwest, Pacific Northwest, and Southeast.
Regional Fluctuations – Commercial
Commercial reconstruction costs rose 5.7% nationwide in 2025, with all states seeing increases. The sharpest gains came from Rhode Island (+11.04%), Maine (+8.89%), and Kansas (+8.37%). Louisiana, Massachusetts, and Georgia posted the biggest ranking improvements, while Hawaii, Tennessee, and Mississippi fell in rank despite positive growth. Overall, cost pressures were strongest in the Northeast and select Southern states.
Key Takeaway:
Key takeaways highlight that residential urban–rural cost differences narrowed in Tennessee and Georgia, with Tennessee flat in commercial costs while North Carolina posted the largest increase. Looking ahead, material tariffs, labor shortages, and demand from research, data facilities, and infrastructure projects will continue to be major cost drivers. Additionally, claim-related expenses not captured in standard construction data—such as mitigation, asbestos removal, demolition, and code upgrades—will further elevate overall claim payments.
Final Thoughts:
As 2025 continues to unfold, the construction industry stands at a critical crossroads of growth and constraint. Strong demand from infrastructure, technology, and disaster recovery projects ensures a steady pipeline of opportunities, yet rising material costs, labor shortages, and regional disparities will continue to pressure margins and project delivery. With concrete emerging as the most influential driver of both material and labor inflation, and additional costs from claims and regulatory requirements adding complexity, stakeholders must remain agile. Success will depend on proactive cost management, strategic workforce planning, and the ability to adapt quickly to shifting market forces.
At Engle Martin, we understand the complex pressures shaping today’s construction environment and the unique challenges they present for claims. Our team brings deep technical expertise, a nationwide network of experienced adjusters, and a proven track record managing high-value and complex losses. With insight into both the economic drivers and the on-the-ground realities of construction projects, Engle Martin is well positioned to support carriers, brokers, and insureds in navigating claims with precision, efficiency, and confidence.
If you’d like to learn more about these insights or discuss how Engle Martin can help navigate these claims, contact us at: info@englemartin.com
(Data Source: Xactware Solutions, Inc.)
