MSI Unveils Groundbreaking Q1 2025 Construction Economy Report
MOCA Systems, a well-established leader in the construction services and technology sector, has officially released its much-anticipated Q1 2025 edition of “Today’s Construction Economy.” This quarterly report, a critical resource for industry professionals, presents in-depth insights into the current economic landscape impacting the construction industry. This edition highlights ongoing supply chain disruptions, persistent labor shortages, regulatory uncertainties, and other emerging challenges that continue to shape the industry’s trajectory.
Sandy Hamby, CEO of MSI, underscored the importance of this report, emphasizing how it has evolved into an indispensable resource for decision-makers across the construction industry. “For years, this report has been a must-read for executives in the largest construction firms and government agencies, equipping them with timely and actionable intelligence to navigate the shifting economic landscape.
The increasing velocity, MSI complexity, and uncertainty in the construction sector impact firms of all sizes, broadening the need for economic intelligence. By expanding access to this report, we aim to empower a larger audience with the insights needed to adapt to a dynamic market.”
Key Highlights and Findings from the Q1 2025 Report
The report delves into numerous MSI economic factors that are influencing the construction industry, including shifting labor dynamics, changes in government policies, and the long-term impact of economic trends on project costs and schedules.
1. Labor Market Trends: Softening Demand but Persistent Skill Shortages
A key concern for construction firms in 2025 is the labor market. While job openings in the construction sector fell significantly in late 2024, the industry is still grappling with an acute shortage of skilled labor.
- Construction job openings in November 2024 declined by 39.2% year-over-year, signaling a potential slowdown in hiring.
- Workforce mobility has decreased, making it harder for firms to relocate skilled workers where they are needed most.
- Stricter immigration policies have further exacerbated labor shortages, particularly for specialized roles in skilled trades. The resulting wage inflation could lead to higher overall project costs.
Brandon Michalski, Principal Construction Economist at MSI and the primary author of the report, noted, “While the MSI construction industry remains strong, firms must be proactive in addressing potential headwinds in 2025. Labor shortages are expected to continue, and businesses will need to develop robust workforce strategies to mitigate the impact of rising labor costs and potential project delays.”
2. Policy and Regulatory Shifts: The Rising Cost of Construction
The Q1 2025 report also MSI examines several key policy changes that could significantly impact construction firms in the near term. Proposed regulatory shifts, particularly in trade and immigration, could drive up costs and contribute to further volatility in the industry.
- Tariffs on Steel and Aluminum: New tariff proposals targeting imported steel and aluminum could push material costs higher, creating additional budgetary challenges for construction firms.
- Stricter Immigration Policies: Changes in immigration laws are likely to reduce the availability of foreign labor, further exacerbating workforce shortages and driving up wages.
- Onshoring and Trade Expansion: While challenging in the short term, efforts to onshore production and expand domestic trade partnerships could yield long-term benefits for the construction industry by reducing reliance on foreign suppliers.
The MSI report urges construction firms to prepare for these potential cost increases by reassessing supply chain strategies and adopting more resilient procurement practices.
3. Supply Chain and Equipment Trends: Stability in Materials, Uncertainty in Machinery Orders
The MSI construction industry has faced supply chain disruptions over the past few years, and while material orders remain relatively stable, there are signs of weakening demand in certain categories.
- Construction Material Orders: Overall, material orders have held steady, indicating continued project activity and stability in the supply chain.
- Machinery Orders: A notable decline in machinery orders has been observed, reflecting reduced investment in equipment replacement and upgrades. This trend suggests a more cautious approach by firms amid concerns over rising costs and potential slowdowns.
- Tariff Enforcement: With tariffs on materials being reintroduced or increased, firms may face added expenses and disruptions in their supply chains.
By closely monitoring these trends, companies can make informed decisions about future investments and avoid unexpected cost spikes.
4. Construction Spending: A Normalization Phase
After a period of rapid growth, construction spending is beginning to normalize. However, sector-specific trends show contrasting dynamics:
- Overall Construction Spending: U.S. construction spending grew 3.0% year-over-year in Q1 2025, marking a more moderate pace compared to previous quarters.
- Nonresidential Construction: Spending in the nonresidential sector rose 2.8%, driven by infrastructure projects and government-backed initiatives.
- Commercial Sector Challenges: Commercial construction saw an 8.0% decline year-over-year, reflecting a slowdown in office and retail developments. Additionally, the industry faces an impending challenge, with over $1 trillion in commercial real estate refinancing expected in the next two years.
The normalization in construction spending signals a shift in market conditions. Firms must navigate this transition carefully, ensuring that projects remain viable and profitable amid fluctuating demand.
The Importance of Economic Intelligence in 2025
The “Today’s Construction Economy” report has long served as a vital resource for executives, project managers, and policymakers seeking a clear understanding of industry trends. MSI’s Economic Services unit, which produces the report, also provides a range of customized economic consulting services tailored to support clients in project strategy, planning, and management.
By leveraging the insights presented in this report, firms can make strategic decisions that align with broader economic trends, ensuring resilience in an unpredictable market.
Looking Ahead: Preparing for the Future of Construction
As 2025 progresses, the construction industry faces both challenges and opportunities. Key takeaways from the MSI report suggest that firms should adopt a proactive approach to address labor shortages, navigate regulatory changes, and manage cost pressures effectively. Companies that invest in workforce development, supply chain resilience, and strategic financial planning will be better positioned to weather uncertainties and capitalize on emerging opportunities.
The full Q1 2025 “Today’s Construction Economy” report is available for industry professionals who wish to gain deeper insights into these trends and their potential impact on the sector.
