North American Construction Market: Navigating Growth Amid Global Uncertainties
A Tale of Two Markets: Resilience and Recovery
The North American construction landscape in 2025 presents a complex narrative of cautious optimism shadowed by significant uncertainties. While the United States prepares for steady growth after a robust 2024 performance, Canada embarks on a recovery journey following a challenging year marked by economic headwinds. This divergent path reflects the broader economic realities facing both nations as they navigate an increasingly volatile global trade environment.
The US construction industry demonstrated remarkable resilience in 2024, achieving 4.5% growth—nearly double the initially projected 2.5%. This impressive performance was largely driven by transformative federal legislation including the Inflation Reduction Act (IRA), the Infrastructure Investment and Jobs Act (IIJA), and the CHIPS and Science Act. These initiatives catalyzed unprecedented investment in semiconductors, clean energy infrastructure, and advanced manufacturing, positioning the US as a global leader in next-generation industrial development.
In stark contrast, Canada's construction sector contracted by 1.8% in 2024, primarily due to a significant slowdown in residential construction and restrictive lending policies that created high financing costs. However, as 2025 unfolds, the Canadian market shows early signs of stabilization with decreasing financing costs and controlled inflation, setting the stage for a gradual recovery.
Economic Foundations: GDP Growth and Inflation Dynamics
The economic backdrop against which these construction markets operate reveals both challenges and opportunities. The US economy, while projected to grow at 1.8% in 2025—down from 2.8% in 2024—faces headwinds from new tariff policies and trade uncertainties. These factors have created a cautious business environment where investment decisions are increasingly scrutinized, leading to reduced capital expenditure in some sectors.
Canada's economic situation mirrors similar challenges, with GDP growth projected at 1.4% for 2025, influenced heavily by US trade policies and geopolitical tensions. The interconnected nature of the North American economy means that policy decisions in one country inevitably ripple across borders, affecting trade flows, investment patterns, and ultimately, construction activity.
Inflation trends in both countries suggest a gradual return to normalcy. US inflation, which peaked at around 8% in 2022, has steadily declined to approximately 2.95% by late 2024, though it's expected to experience a slight uptick in 2025 due to tariff-related price pressures. Canada has achieved greater success in taming inflation, bringing it down from a peak of 6.8% in 2022 to 2.4% in 2024, with expectations of reaching the 2% target range by early 2025.
Sector-Specific Growth Trajectories
The AI and Data Center Revolution
Perhaps no sector exemplifies the transformative forces reshaping North American construction more than data centers. The artificial intelligence boom has created unprecedented demand for digital infrastructure, with US data center construction spending surging by 56% in 2024. The momentum continued into 2025 with year-over-year growth rates of 33% recorded in March, reflecting the urgent need to support AI and high-performance computing applications.
The scale of this transformation is staggering. The US is projected to become the world's fastest-growing data center market, with power demand expected to rise from 25 GW in 2024 to over 80 GW by 2030. This growth trajectory is exemplified by ambitious projects like the Stargate Initiative, which plans to invest approximately $500 billion over four years to develop advanced AI infrastructure, beginning with $100 billion for large-scale 5 GW data centers.
However, this rapid expansion faces significant challenges. Power infrastructure constraints have emerged as critical bottlenecks, with many projects experiencing delays due to grid capacity limitations. The industry's response has been innovative, with operators increasingly adopting "Bring Your Own Power" strategies through direct purchase agreements with renewable energy providers, and exploring cutting-edge solutions like small modular nuclear reactors.
Life Sciences: Maintaining Global Leadership
The United States continues to dominate the global life sciences sector, commanding nearly 70% of total deal value in 2024. This leadership position reflects not just financial strength but also the country's sophisticated research infrastructure and regulatory environment that attracts international investment.
The sector is undergoing significant evolution, with investors shifting toward larger, more strategic deals and prioritizing established players with proven track records. Manufacturing activity is particularly robust, driven by major pharmaceutical companies increasing US production capacity to enhance supply chain resilience and capitalize on the growing demand for biologics and gene therapies.
Canada's life sciences sector, while smaller in scale, benefits from substantial government support, with over CA$2.3 billion committed to 41 initiatives aimed at advancing biomanufacturing, vaccine development, and therapeutics. However, the sector has experienced some momentum loss since 2023, largely attributed to funding pressures affecting smaller biotechnology companies.
High-Tech Industrial: Semiconductors and Battery Manufacturing
The semiconductor and battery manufacturing renaissance in North America represents one of the most significant industrial transformations in decades. The CHIPS and Science Act has catalyzed over $540 billion in investments across more than 100 projects in 28 states, with the Semiconductor Industry Association projecting that US manufacturing capacity will grow by 203% from 2022 to 2032.
Battery manufacturing has emerged as a cornerstone of the clean energy transition, representing 69% of all new clean tech manufacturing projects following the IRA's enactment. US battery manufacturing capacity is projected to reach 1,083 GWh annually by 2028, sufficient to power approximately 12.1 million electric vehicles annually.
Canada has positioned itself as a leader in the global lithium-ion battery supply chain, though recent project delays due to slower EV adoption rates have tempered some of the initial enthusiasm. Despite these challenges, projects worth $14 billion remain in the pipeline as of Q1 2025.
Infrastructure and Power: The Critical Enablers
The construction boom across mission-critical sectors has highlighted North America's aging infrastructure as both a challenge and an opportunity. Over half of US grid infrastructure is more than 20 years old, with 70% of transmission lines nearing the end of their operational life. Canada faces similar challenges, with much of its grid infrastructure built over 50 years ago.
Recognition of these limitations has spurred unprecedented investment in grid modernization. Power infrastructure investment has nearly doubled from $67 billion in 2017 to $124 billion in 2024. The Department of Energy is backing 58 grid modernization projects across 44 states with $3.5 billion, unlocking over $8 billion in public-private investments.
The growing importance of reliable power supply has transformed site selection criteria for major industrial projects. Power availability, reliability, and sustainability have emerged as key drivers, often taking precedence over traditional factors like labor costs and proximity to markets. This shift is particularly pronounced in the data center sector, where power disruptions account for 52% of major outages according to Uptime Institute surveys.
Supply Chain Challenges and Adaptations
The supply chain outlook for 2025 is characterized by significant volatility, largely driven by evolving tariff policies that are reshaping procurement strategies across all construction sectors. The imposition of 25% tariffs on steel and aluminum imports has immediate implications for construction costs, while broader trade uncertainties are forcing companies to reassess their global supply strategies.
Lead times for critical equipment remain extended, particularly for electrical components like transformers and switchgear, where delays of 2-3 years in the US and 3-4 years in Canada have become commonplace. The situation is compounded by surging demand from data center and renewable energy projects, creating intense competition for limited manufacturing capacity.
Companies are responding by diversifying their supply chains, exploring tariff-exempt sourcing options, and increasing efforts to localize production. However, these adaptations require time and significant investment, meaning supply chain pressures are likely to persist well into 2026.
Labor Market Dynamics
The construction industry's growth ambitions face a fundamental constraint: labor availability. Skilled labor shortages have emerged as a critical bottleneck across all sectors, with particular acute shortages in specialized trades required for high-tech manufacturing and data center construction.
The Semiconductor Industry Association estimates that of the over 100,000 new manufacturing and design jobs expected by 2030, approximately 67,000 may go unfilled due to skills shortages. This challenge is exacerbated by immigration policy changes that have tightened labor supply, with construction wages rising 6.0% in the US and 5.2% in Canada as companies compete for limited skilled workers.
The industry is responding through increased automation, prefabrication, and modular construction techniques. Companies are also investing heavily in training programs and apprenticeships, though these initiatives require time to yield results. The success of the construction boom may ultimately depend on the industry's ability to attract and retain skilled workers in an increasingly competitive labor market.
Environmental and Sustainability Imperatives
Sustainability considerations have become central to construction planning across North America, driven by both regulatory requirements and market demand. Despite some policy uncertainties at the federal level, many companies remain committed to carbon-neutral developments and energy-efficient buildings.
Cities across the US and Canada continue to enforce stricter building performance standards. Chicago's Energy Transformation Code and Seattle's near-zero carbon benchmarks exemplify the regulatory push toward more sustainable construction practices. These requirements are driving a shift from simple component-level upgrades to integrated, system-based retrofits that combine HVAC, lighting, controls, and envelope improvements.
The trend toward corporate power purchase agreements (CPPAs) reflects the industry's commitment to clean energy. Corporate procurement in North America reached 18GW in 2024, reflecting an 18% year-over-year increase, with solar accounting for more than half of the contracted capacity.
Looking Forward: Navigating Uncertainty
As North America's construction industry moves through 2025, success will depend largely on adaptability and strategic planning. The industry has demonstrated remarkable resilience through previous disruptions, from regional conflicts to pandemic-related setbacks, and this experience positions it well to manage current uncertainties.
Key success factors include diversified supply chain strategies, proactive power infrastructure planning, and innovative approaches to labor challenges. Companies that can effectively integrate sustainability requirements while maintaining operational efficiency will be best positioned to capitalize on the unprecedented growth opportunities ahead.
The construction industry's trajectory through 2028 appears positive, with US annual growth projected at 3.8% and Canada at 2.8%. However, realizing this potential will require continued collaboration among stakeholders, adaptive strategies to manage risks, and sustained investment in the infrastructure and workforce needed to support North America's evolving economic landscape.
The next few years will be defining for North American construction, as the industry navigates the balance between unprecedented opportunity and significant operational challenges. Those who can successfully adapt to this new reality will shape the continent's infrastructure for decades to come.
Click here to download the complete report
A Tale of Two Markets: Resilience and Recovery
The North American construction landscape in 2025 presents a complex narrative of cautious optimism shadowed by significant uncertainties. While the United States prepares for steady growth after a robust 2024 performance, Canada embarks on a recovery journey following a challenging year marked by economic headwinds. This divergent path reflects the broader economic realities facing both nations as they navigate an increasingly volatile global trade environment.
The US construction industry demonstrated remarkable resilience in 2024, achieving 4.5% growth—nearly double the initially projected 2.5%. This impressive performance was largely driven by transformative federal legislation including the Inflation Reduction Act (IRA), the Infrastructure Investment and Jobs Act (IIJA), and the CHIPS and Science Act. These initiatives catalyzed unprecedented investment in semiconductors, clean energy infrastructure, and advanced manufacturing, positioning the US as a global leader in next-generation industrial development.
In stark contrast, Canada's construction sector contracted by 1.8% in 2024, primarily due to a significant slowdown in residential construction and restrictive lending policies that created high financing costs. However, as 2025 unfolds, the Canadian market shows early signs of stabilization with decreasing financing costs and controlled inflation, setting the stage for a gradual recovery.
Economic Foundations: GDP Growth and Inflation Dynamics
The economic backdrop against which these construction markets operate reveals both challenges and opportunities. The US economy, while projected to grow at 1.8% in 2025—down from 2.8% in 2024—faces headwinds from new tariff policies and trade uncertainties. These factors have created a cautious business environment where investment decisions are increasingly scrutinized, leading to reduced capital expenditure in some sectors.
Canada's economic situation mirrors similar challenges, with GDP growth projected at 1.4% for 2025, influenced heavily by US trade policies and geopolitical tensions. The interconnected nature of the North American economy means that policy decisions in one country inevitably ripple across borders, affecting trade flows, investment patterns, and ultimately, construction activity.
Inflation trends in both countries suggest a gradual return to normalcy. US inflation, which peaked at around 8% in 2022, has steadily declined to approximately 2.95% by late 2024, though it's expected to experience a slight uptick in 2025 due to tariff-related price pressures. Canada has achieved greater success in taming inflation, bringing it down from a peak of 6.8% in 2022 to 2.4% in 2024, with expectations of reaching the 2% target range by early 2025.
Sector-Specific Growth Trajectories
The AI and Data Center Revolution
Perhaps no sector exemplifies the transformative forces reshaping North American construction more than data centers. The artificial intelligence boom has created unprecedented demand for digital infrastructure, with US data center construction spending surging by 56% in 2024. The momentum continued into 2025 with year-over-year growth rates of 33% recorded in March, reflecting the urgent need to support AI and high-performance computing applications.
The scale of this transformation is staggering. The US is projected to become the world's fastest-growing data center market, with power demand expected to rise from 25 GW in 2024 to over 80 GW by 2030. This growth trajectory is exemplified by ambitious projects like the Stargate Initiative, which plans to invest approximately $500 billion over four years to develop advanced AI infrastructure, beginning with $100 billion for large-scale 5 GW data centers.
However, this rapid expansion faces significant challenges. Power infrastructure constraints have emerged as critical bottlenecks, with many projects experiencing delays due to grid capacity limitations. The industry's response has been innovative, with operators increasingly adopting "Bring Your Own Power" strategies through direct purchase agreements with renewable energy providers, and exploring cutting-edge solutions like small modular nuclear reactors.
Life Sciences: Maintaining Global Leadership
The United States continues to dominate the global life sciences sector, commanding nearly 70% of total deal value in 2024. This leadership position reflects not just financial strength but also the country's sophisticated research infrastructure and regulatory environment that attracts international investment.
The sector is undergoing significant evolution, with investors shifting toward larger, more strategic deals and prioritizing established players with proven track records. Manufacturing activity is particularly robust, driven by major pharmaceutical companies increasing US production capacity to enhance supply chain resilience and capitalize on the growing demand for biologics and gene therapies.
Canada's life sciences sector, while smaller in scale, benefits from substantial government support, with over CA$2.3 billion committed to 41 initiatives aimed at advancing biomanufacturing, vaccine development, and therapeutics. However, the sector has experienced some momentum loss since 2023, largely attributed to funding pressures affecting smaller biotechnology companies.
High-Tech Industrial: Semiconductors and Battery Manufacturing
The semiconductor and battery manufacturing renaissance in North America represents one of the most significant industrial transformations in decades. The CHIPS and Science Act has catalyzed over $540 billion in investments across more than 100 projects in 28 states, with the Semiconductor Industry Association projecting that US manufacturing capacity will grow by 203% from 2022 to 2032.
Battery manufacturing has emerged as a cornerstone of the clean energy transition, representing 69% of all new clean tech manufacturing projects following the IRA's enactment. US battery manufacturing capacity is projected to reach 1,083 GWh annually by 2028, sufficient to power approximately 12.1 million electric vehicles annually.
Canada has positioned itself as a leader in the global lithium-ion battery supply chain, though recent project delays due to slower EV adoption rates have tempered some of the initial enthusiasm. Despite these challenges, projects worth $14 billion remain in the pipeline as of Q1 2025.
Infrastructure and Power: The Critical Enablers
The construction boom across mission-critical sectors has highlighted North America's aging infrastructure as both a challenge and an opportunity. Over half of US grid infrastructure is more than 20 years old, with 70% of transmission lines nearing the end of their operational life. Canada faces similar challenges, with much of its grid infrastructure built over 50 years ago.
Recognition of these limitations has spurred unprecedented investment in grid modernization. Power infrastructure investment has nearly doubled from $67 billion in 2017 to $124 billion in 2024. The Department of Energy is backing 58 grid modernization projects across 44 states with $3.5 billion, unlocking over $8 billion in public-private investments.
The growing importance of reliable power supply has transformed site selection criteria for major industrial projects. Power availability, reliability, and sustainability have emerged as key drivers, often taking precedence over traditional factors like labor costs and proximity to markets. This shift is particularly pronounced in the data center sector, where power disruptions account for 52% of major outages according to Uptime Institute surveys.
Supply Chain Challenges and Adaptations
The supply chain outlook for 2025 is characterized by significant volatility, largely driven by evolving tariff policies that are reshaping procurement strategies across all construction sectors. The imposition of 25% tariffs on steel and aluminum imports has immediate implications for construction costs, while broader trade uncertainties are forcing companies to reassess their global supply strategies.
Lead times for critical equipment remain extended, particularly for electrical components like transformers and switchgear, where delays of 2-3 years in the US and 3-4 years in Canada have become commonplace. The situation is compounded by surging demand from data center and renewable energy projects, creating intense competition for limited manufacturing capacity.
Companies are responding by diversifying their supply chains, exploring tariff-exempt sourcing options, and increasing efforts to localize production. However, these adaptations require time and significant investment, meaning supply chain pressures are likely to persist well into 2026.
Labor Market Dynamics
The construction industry's growth ambitions face a fundamental constraint: labor availability. Skilled labor shortages have emerged as a critical bottleneck across all sectors, with particular acute shortages in specialized trades required for high-tech manufacturing and data center construction.
The Semiconductor Industry Association estimates that of the over 100,000 new manufacturing and design jobs expected by 2030, approximately 67,000 may go unfilled due to skills shortages. This challenge is exacerbated by immigration policy changes that have tightened labor supply, with construction wages rising 6.0% in the US and 5.2% in Canada as companies compete for limited skilled workers.
The industry is responding through increased automation, prefabrication, and modular construction techniques. Companies are also investing heavily in training programs and apprenticeships, though these initiatives require time to yield results. The success of the construction boom may ultimately depend on the industry's ability to attract and retain skilled workers in an increasingly competitive labor market.
Environmental and Sustainability Imperatives
Sustainability considerations have become central to construction planning across North America, driven by both regulatory requirements and market demand. Despite some policy uncertainties at the federal level, many companies remain committed to carbon-neutral developments and energy-efficient buildings.
Cities across the US and Canada continue to enforce stricter building performance standards. Chicago's Energy Transformation Code and Seattle's near-zero carbon benchmarks exemplify the regulatory push toward more sustainable construction practices. These requirements are driving a shift from simple component-level upgrades to integrated, system-based retrofits that combine HVAC, lighting, controls, and envelope improvements.
The trend toward corporate power purchase agreements (CPPAs) reflects the industry's commitment to clean energy. Corporate procurement in North America reached 18GW in 2024, reflecting an 18% year-over-year increase, with solar accounting for more than half of the contracted capacity.
Looking Forward: Navigating Uncertainty
As North America's construction industry moves through 2025, success will depend largely on adaptability and strategic planning. The industry has demonstrated remarkable resilience through previous disruptions, from regional conflicts to pandemic-related setbacks, and this experience positions it well to manage current uncertainties.
Key success factors include diversified supply chain strategies, proactive power infrastructure planning, and innovative approaches to labor challenges. Companies that can effectively integrate sustainability requirements while maintaining operational efficiency will be best positioned to capitalize on the unprecedented growth opportunities ahead.
The construction industry's trajectory through 2028 appears positive, with US annual growth projected at 3.8% and Canada at 2.8%. However, realizing this potential will require continued collaboration among stakeholders, adaptive strategies to manage risks, and sustained investment in the infrastructure and workforce needed to support North America's evolving economic landscape.
The next few years will be defining for North American construction, as the industry navigates the balance between unprecedented opportunity and significant operational challenges. Those who can successfully adapt to this new reality will shape the continent's infrastructure for decades to come.
Click here to download the complete report
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