Profitability Despite optimism, systemic and economic headwinds could pressure profits. The construction industry will continue to find work on large, multi-billion-dollar projects, largely in infrastructure. But inflation, climate change and interest rates — not to mention the expense of insuring the large risks that come with sizable construction projects — could dampen profits. Total new construction spending is projected to reach 2 $2.145 trillion in 2025, hitting $2.340 trillion by 2028. Non-residential construction spending is only expected to 3 increase 2%, stalling after this year’s anticipated 7% gain. In 2025, cooling inflation and declining interest rates are To keep balance sheets strong as construction firms likely to result in more construction projects, but also handle larger and more complex projects, companies will upward pressure on labor and supply costs. Materials costs need to lean on an experienced insurance broker who can will continue to have a major effect on profitability due to proactively identify alternative insurance options and risk 4 fluctuating prices. transfer mechanisms, such as parametric insurance and retention strategies. Forty-four percent of construction respondents to HUB International's 2025 Outlook Executive Survey report they Companies partnering with other construction firms on are “highly confident” about their companies’ performance large projects will need guidance from their broker and a in 2025, which bodes well for growth and the overall holistic approach to insurance and risk management as the state of the industry. However, any new profits could be level of complexity and interconnectivity increases with significantly impacted by the lack of insurance to protect each partner. against risk, with only 16% citing that the coverage they have is adequate. 1. . Equally concerning is the systemic risk of $2 trillion in 2. Statista.com, “New construction put in place in the United States commercial real estate debt maturing over the next two from 2005 to 2023, with forecasts until 2028,” August 7, 2024. 5 6 3. American Institute of Architects, “Construction spending gains years. Refinancing these loans with high vacancy rates is likely to result in more defaults, potentially causing a projected this year, expected to stall in 2025,” July 17, 2024. broader lending pullback, which would be a major blow to 4. Construction Dive, “Construction input prices drop for first time in 2024,” June 13, 2024. the construction industry’s bottom line. 5. MossAdams, “The Commercial Real Estate Debt Dilemma,” April 3, 2024. As the business environment remains unstable — and 6. Statista, “How Many U.S. OfÏces Are Empty?” July 11, 2024. unpredictable — tightly managed financial controls will help construction firms compete for a shrinking pool of capital. 3