The U.S. non-residential construction sector saw a slight 0.2% decline in spending in December 2024, but deeper analysis of the data reveals that data center and manufacturing construction projects were the driving force behind growth throughout the year. These two segments alone accounted for 94% of the total increase in non-residential spending from December 2023 to December 2024, according to an analysis by the Associated Builders and Contractors (ABC).

ABC, a leading trade organization representing more than 23,000 contractors and construction-related businesses, reviewed U.S. Census Bureau data and found that while overall private-sector non-residential construction had mixed results, data center and manufacturing facility construction remained strong and will likely continue their momentum into 2025.

‍Key Trends in Non-Residential Construction Spending

ABC's analysis of December 2024 construction spending data showed several important trends:

• Private non-residential construction spending saw a slight 0.1% increase from the previous month.
• Public non-residential spending, however, dropped 0.5% in December.
• Overall non-residential construction spending reached an annualized total of $1.2 trillion for 2024.
• Nine out of 16 non-residential subcategories saw a decline in spending for December, including amusement/recreation, public safety, commercial, educational, transportation, healthcare, sewage/waste disposal, conservation/development, and water supply.

"Data centers, which are part of the office category, and manufacturing accounted for 94% of the increase in total non-residential construction spending from December 2023 to December 2024," said Anirban Basu, Chief Economist at ABC.

Data Center and Manufacturing Sectors Lead GrowthThe surge in data center construction has been fueled by the increasing demand for cloud computing, artificial intelligence, and large-scale digital infrastructure. The rapid growth of AI-driven applications, coupled with the expansion of major tech companies, has led to record investments in hyperscale and enterprise data centers across the U.S.In parallel, manufacturing construction has been driven by the reshoring of production facilities, increased federal incentives for domestic manufacturing, and supply chain diversification efforts. Industries such as semiconductor production, electric vehicle (EV) battery plants, and high-tech manufacturing are seeing sustained investment, contributing to the sector's growth.

"Activity in these segments, and perhaps only these segments, will remain elevated regardless of upward pressure on construction costs," Basu added.

Challenges and Economic Pressures in 2025Despite the strength in data center and manufacturing construction, other private-sector construction segments have struggled. Rising interest rates, supply chain disruptions, and geopolitical tensions—particularly an emerging trade dispute with Canada and Mexico—are expected to weigh heavily on many non-residential subcategories in 2025.

"While public sector activity should at least partially rebound in the coming months, high interest rates and an emerging trade war with Canada and Mexico will continue to weigh on many privately financed segments," Basu warned.

One contributing factor to the December decline in public non-residential construction spending was the transition period between presidential administrations and seasonal weather delays, which temporarily slowed project starts.

"Public sector non-residential spending fell sharply in the last month of 2024, but that decline was likely a short-term phenomenon as the transition between presidential administrations and cold weather delayed construction work," Basu noted.

Future Outlook for Non-Residential ConstructionLooking ahead, ABC forecasts that data center and manufacturing construction will continue to drive the industry in 2025, as major corporations and public sector investments remain focused on these sectors. However, concerns about financing conditions, labor shortages, and material costs persist.The resilience of the private sector's most dominant categories—data centers and manufacturing—suggests a shifting landscape for the construction industry, where other traditional segments may struggle while technology and industrial projects remain robust.ABC will continue monitoring U.S. Census Bureau data and economic indicators to assess the health of the non-residential construction sector in the coming months.