Policy volatility reshaping the U.S. construction landscape

CHICAGO, July 15, 2025 – Policy uncertainty has disrupted anticipated development patterns in the U.S. construction industry, creating challenges but also opportunities that vary widely across regions, sectors and projects. JLL’s 2025 Construction Perspective: U.S. Mid-year Update provides crucial insights on navigating this complex environment with a focused response that moves beyond reactivity.

“The construction industry is experiencing uncertainty that is affecting everything from material costs to labor availability,” said Louis Molinini, Head of Project and Development Services, Americas, JLL. “Despite these challenges, we’re seeing remarkable resilience in select sectors and regions that remain extremely active. It's a local game that rewards strategic capital planning more than ever.”

While there are bright spots, the U.S. construction industry faces a challenging outlook with projects increasingly on hold, spending forecasts adjusted downward and contractors facing reductions in secured work. Current forecasts anticipate real construction spending growth to hold at its lowest point since the pandemic through 2026 Limited activity now will complicate the industry’s capacity to ramp up quickly as uncertainty dissipates and conditions improve.

Public investments continue to disproportionately reshape both the economy and construction landscape, with private investment responding unevenly as investors assess changing priorities and funding support. With federal funding being redirected, data centers nevertheless continue to expand at an incredible pace, looking to more than double real spending from 2023 to 2026.

The cost environment has dramatically shifted in the last six months—transitioning from modest contraction to potentially one of the largest increases in recent history. Overall cost growth forecasts now sit in a 7-12% for 2025. Reliance on imported materials is not even, with goods critical to data centers and advanced manufacturing facing particularly high exposure across their supply chains. Delays and renegotiations have pushed back the impacts of tariffs and increases will emerge more fully over the back half of this year and into 2026.

The construction industry faces unprecedented pressure from immigration policy, with the anticipated growth rate down to just 1%, well below the 3% average rate of the past few years. These effects vary geographically, impacting regions in different ways that will shift project viability, timelines and wage premiums across the U.S.

“With activity currently slowed, the full effects of lower labor growth won’t be clear right away,” said Andrew Volz, Research Manager, Project and Development Services, JLL. “As we ramp up demand in 2026 however, the extent of the disruption will become readily apparent. Labor retention and development will remain the primary concern of forward looking contractors, regardless of current backlogs.”

Despite these challenges, there are several opportunities for strategic advantage:

• Select industries and locations remain extremely active, with data centers and advanced manufacturing driving growth despite broader hesitancy
• Critical sector investments ensure construction opportunities remain, though delays will alter their shape and timing
• Forward-thinking organizations are implementing flexible approaches to procurement, labor sourcing, and project timelines
   

“Looking ahead to the next 12 months, strategic adaptation to challenges and flexibility will be key,” added Molinini. “Understanding that project exposures aren’t equal and local factors matter most for project outcomes is essential for success in today’s environment.”

JLL Project and Development Services is a leader in the advisory, design, management and delivery of commercial real estate projects for the world’s most prominent corporations, educational institutions, public jurisdictions, healthcare organizations, industrial facilities, retailers, hotels, sports facilities and real estate owners. JLL’s project management team comprises 9,300 project managers across 80 countries with $87.4 billion in projects managed annually. JLL’s design teams consist of 1,200 design professionals from over 50 countries, across more than 50 studios and three Centers of Excellence to service clients with end-to-end design solutions. Visit jll.com/deliver-projects to learn more.

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