Construction Activity Declines Amid Commercial Slowdown, While Infrastructure Projects Provide Stability

Construction activity slowed in January 2025, with total construction starts falling 6% to a seasonally adjusted annual rate of $1.1 trillion, according to the latest Dodge Construction Network report. The decline was primarily driven by a sharp pullback in commercial projects, even as infrastructure work—such as highway, bridge, and energy developments—helped cushion the downturn.

Nonresidential building starts, including office, hotel, and healthcare facilities, plunged 18%, while residential starts dipped just 1%. However, nonbuilding construction, which includes infrastructure projects, saw a 4% increase, offering some stability in an otherwise slow start to the year.

“After robust data center starts in November and December, total office starts fell back in January to more historically typical levels and drove a sizable piece of the month-to-month decline,” said Sarah Martin, associate director of forecasting at Dodge Construction Network.
“However, most nonresidential sectors saw weakness over the month.”

Labor and Economic Uncertainty Impact Construction

Despite continued demand for infrastructure development, labor shortages, high material costs, and uncertainty around tariffs and immigration policies are weighing on the construction sector, Martin added.

“Projects are likely to move through the planning queue slowly, at least until the Federal Reserve resumes expected cutting of rates in the back half of the year,” she said.

January’s 9 Largest Construction Groundbreakings

Despite the overall slowdown, several major projects broke ground in January, contributing to long-term construction momentum. These include:

1. $5 billion – Children’s Health & UTSW New Pediatric Campus (Dallas, TX)
2. $1.1 billion – Sequoia Solar Farm (Callahan County, TX)
3. $696 million – NHHIP Segment 3B-2 Road Widening Project (Houston, TX)
4. $630 million – Beaver Stadium Renovations (University Park, PA)
5. $470 million – Ulana Ward Village Tower (Honolulu, HI)
6. $400 million – JEM Residences at Miami World Center (Miami, FL)
7. $333 million – Mid-Hudson Forensic Psychiatric Hospital (New Hampton, NY)
8. $307 million – Timber Mill High School & Athletic Field (Conroe, TX)
9. $279 million – Alafia Affordable Apartments (Spring Creek, NY)

Infrastructure Provides Stability Amid Commercial Decline

The biggest contributor to January’s nonbuilding sector gains was highway and bridge construction, which increased 14% month-over-month. Utility and gas projects saw a small 1% increase, though environmental public works projects declined 14%.

On a year-over-year basis, nonbuilding construction jumped 17%, fueled by:

• 84% surge in utility and gas projects
• 10% increase in highway and bridge groundbreakings

Mixed Performance in Residential Construction

The residential sector also showed mixed trends in January:

• Multifamily construction provided some stability, ticking up 2%.
• Single-family starts declined 2%, though they remain up 6% year-over-year.
• Multifamily projects fell 15% year-over-year, indicating a slowdown in larger-scale residential developments.

What’s Next for Construction in 2025?

The overall construction outlook remains uncertain, with commercial projects facing strong headwinds while infrastructure and residential construction continue to show resilience. As the industry watches interest rate policies, labor trends, and material costs, project developers may take a cautious approach in the coming months.

Originally reported by Sebastian Obando in Construction Dive.