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Construction leaders face labor shortages, supply chain pressures and changing policies heading into 2025.
Labor continues to be a significant cost factor in the construction industry, especially in regions with high-tech, mission-critical projects such as data centers, said Jeff Peragallo, director and vice president of operations from construction consultancy Linesight. The Dublin-based company recently released its Construction Markets Insights report, which covers trends in labor, supply and material prices in the United States.
While commodity prices have largely stabilized by 2024, fluctuating metal costs and ongoing procurement challenges continue to test the resilience of the construction sector.
Still, proactive planning and strategic investments can help contractors prepare for the year ahead. Here, Peragallo talks to Construction Dive about labor shortages, hiring strategies and the future of data center construction.
This interview has been edited for brevity and clarity.
Immersion in CONSTRUCTION: What are the main results of this report?
JEFF PERAGALLO: Labor remains a major cost factor due to a shortage of skilled workers. Regions with important high-tech and mission-critical projects still struggle with a lack of skilled labor, especially in MEP jobs.
By 2024, the demand for AI computing and data center expansion created significant pressure on the supply chain, especially in power and cooling solutions. While 2024 tested the resilience of supply chains, proactive planning and investments in supplies offer hope for 2025.
Jeff Peragallo
Courtesy of Linesight
During 2025, the new administration may introduce changes related to immigration policies and fees. This will require close monitoring. Also, while most commodity prices have stabilized, the fluctuating price of metals remains a concern. Copper and aluminum prices are higher than in 2023 due to supply issues, raw material availability and import costs.
Labor shortages remain a persistent problem in construction. What strategies or policy changes are being considered in 2025 to mitigate some of this?
Several strategies are key for 2025. Before major construction projects begin, a labor survey can provide critical information about local construction supply and demand. This helps determine if the geography of the labor pool needs expansion or if other measures are needed to ensure an adequate workforce.
Offsite manufacturing is another strategy. Reducing on-site labor requirements by leveraging off-site manufacturing can significantly improve efficiency and address labor constraints.
It is also essential to create an attractive work environment. This includes providing on-site services, cultivating a positive workplace culture, and offering unique benefits to attract and retain workers. Finally, focus on partnerships and repeat business with industry suppliers to create consistent and reliable resources versus a continuous cycle of competitive bidding.
This approach can improve project planning and execution, helping to mitigate labor shortage challenges.
How should contractors approach procurement and pricing strategies to mitigate risks in 2025?
Early engagement with vendors and accurate demand forecasting are essential. Collaborating with vendors early in the project lifecycle ensures better access to production slots and allows contractors to set prices ahead of potential cost increases.
Expanding the supplier base then reduces reliance on sole sources, helping to manage risks associated with supply chain disruptions or geopolitical challenges. Monitoring commodity trends, such as fluctuating material costs, can help contractors make informed decisions about when and how to purchase materials. Strategically taking advantage of price drops can reduce costs, while noting that price changes due to tariffs are excluded from proposals.
Contractors should also prioritize components with procurement challenges, such as transformers and cooling systems, to avoid delays.
Data center demand driven by artificial intelligence has put pressure on supply chains, especially for power and cooling solutions. How do you foresee 2025 evolving and what opportunities or challenges does it present for contractors?
2024 saw persistent challenges with long lead times for critical equipment, including generators over 3,000 kW facing lead times of up to 130 weeks globally and medium voltage transformers with a average 43 to 47 weeks term.
AI computing and data center expansion put significant pressure on the power and cooling solutions supply chain, with limited supplier capacity affecting project timelines.
A reduction in these efforts is expected in 2025, with opportunities to expand the production capabilities of key suppliers, which should begin to stabilize delivery times in the second half of 2025. Refrigeration solutions and systems energy distribution will be areas of attention, with continuous innovation to satisfy. growing demands
However, the challenge will remain high demand for advanced equipment and potential external disruptions, including geopolitical risks.
To mitigate risks, companies will need to strengthen demand forecasting, secure production slots early and diversify supplier bases. Early vendor engagement and strategic foresight will remain vital to navigating today’s complexities.
