News
December 27, 2024

Key Trends Shaping California's Construction Industry in 2025

Caroline Raffetto

The California construction landscape is poised for transformation in 2025, driven by economic pressures, evolving workforce dynamics, and growing sustainability goals. Despite challenges in areas like aviation, healthcare, and education, the industry is adapting and innovating to address the increasing demand for infrastructure and community enhancements.

Here are five key trends shaping California’s construction sector:

Private Development Slows Due to Economic Uncertainty

High interest rates and fluctuating market conditions have continued to slow private development in California, with some sectors seeing a significant decline. For example, commercial construction decreased by 14.8% in 2024. In 2025, the focus will be on how Federal Reserve actions regarding interest rates influence investor interest in high-growth sectors like housing and data centers. “We need to focus on efficiency, construction systems, and early engagement in project development,” said industry experts.

Public Project Growth Continues

Public construction has seen steady growth, with sectors such as public safety, healthcare, and education leading the charge. Voters have backed significant initiatives like Proposition 1 for behavioral health treatment centers and Proposition 2 for K-12 school and community college facility upgrades. Despite the positive outlook, project delays due to budget misalignment remain an issue. Experts are advocating for early engagement and realistic budgeting to ensure these projects stay on track.

Labor Market Growth and Innovation

The construction industry saw a 3.0% growth in jobs over the past year, with national construction unemployment at 3.7%. In California, the challenge of a skilled labor shortage presents an opportunity to innovate workforce development. Skanska, for example, has launched programs like the Excellence in Construction Leadership Program (ECLP) and Construction Management Building Block Program to develop a diverse and skilled workforce for the future.

Supply Chain Disruptions Impacting Material Costs

Ongoing supply chain issues, especially concerning electrical materials for data centers, electrification, and electric vehicles, have led to significant delays. Prices for metals like copper, steel, and nickel spiked due to global market factors. Skanska is working closely with suppliers to minimize project delays and keep timelines on track, recognizing that managing material supply is crucial in today’s construction environment.

Sustainability and Decarbonization Efforts

California’s commitment to sustainability is encouraging contractors to adopt greener practices. Skanska has been leading the way with adaptive reuse projects, which reduce embodied carbon emissions by repurposing existing materials and infrastructure. For example, at Portland International Airport, Skanska collaborated with local recyclers to turn wood waste into building materials. These initiatives align with California’s environmental goals and Skanska’s target of achieving net-zero carbon emissions by 2045.

As California’s construction industry adapts to evolving trends, public investment and a focus on sustainability and innovation provide a pathway to success. Through collaboration and forward-thinking solutions, the state is poised to lead the way in redefining construction standards and building a more sustainable, prosperous future.

News
December 27, 2024

Key Trends Shaping California's Construction Industry in 2025

Caroline Raffetto
Construction Industry
California

The California construction landscape is poised for transformation in 2025, driven by economic pressures, evolving workforce dynamics, and growing sustainability goals. Despite challenges in areas like aviation, healthcare, and education, the industry is adapting and innovating to address the increasing demand for infrastructure and community enhancements.

Here are five key trends shaping California’s construction sector:

Private Development Slows Due to Economic Uncertainty

High interest rates and fluctuating market conditions have continued to slow private development in California, with some sectors seeing a significant decline. For example, commercial construction decreased by 14.8% in 2024. In 2025, the focus will be on how Federal Reserve actions regarding interest rates influence investor interest in high-growth sectors like housing and data centers. “We need to focus on efficiency, construction systems, and early engagement in project development,” said industry experts.

Public Project Growth Continues

Public construction has seen steady growth, with sectors such as public safety, healthcare, and education leading the charge. Voters have backed significant initiatives like Proposition 1 for behavioral health treatment centers and Proposition 2 for K-12 school and community college facility upgrades. Despite the positive outlook, project delays due to budget misalignment remain an issue. Experts are advocating for early engagement and realistic budgeting to ensure these projects stay on track.

Labor Market Growth and Innovation

The construction industry saw a 3.0% growth in jobs over the past year, with national construction unemployment at 3.7%. In California, the challenge of a skilled labor shortage presents an opportunity to innovate workforce development. Skanska, for example, has launched programs like the Excellence in Construction Leadership Program (ECLP) and Construction Management Building Block Program to develop a diverse and skilled workforce for the future.

Supply Chain Disruptions Impacting Material Costs

Ongoing supply chain issues, especially concerning electrical materials for data centers, electrification, and electric vehicles, have led to significant delays. Prices for metals like copper, steel, and nickel spiked due to global market factors. Skanska is working closely with suppliers to minimize project delays and keep timelines on track, recognizing that managing material supply is crucial in today’s construction environment.

Sustainability and Decarbonization Efforts

California’s commitment to sustainability is encouraging contractors to adopt greener practices. Skanska has been leading the way with adaptive reuse projects, which reduce embodied carbon emissions by repurposing existing materials and infrastructure. For example, at Portland International Airport, Skanska collaborated with local recyclers to turn wood waste into building materials. These initiatives align with California’s environmental goals and Skanska’s target of achieving net-zero carbon emissions by 2045.

As California’s construction industry adapts to evolving trends, public investment and a focus on sustainability and innovation provide a pathway to success. Through collaboration and forward-thinking solutions, the state is poised to lead the way in redefining construction standards and building a more sustainable, prosperous future.