Chris Fisher is a Managing Principal at consulting and M&A advisory company Ducker Carlisle. There, he is responsible for Global Commercial Team while also leading the firms Building and Construction industry practice. Fisher holds a Bachelor of Science in Industrial Management from Purdue University and an MBA with specialization in global economics from Indiana University. He is an active participant and speaker among many construction and industrial industry groups and has testified as an expert before the Federal Trade Commission and often presents at analyst days and board meetings.
ForConstructionPros.com connected with Fisher early December 2024 about the 2025 year and potential trends in construction.
Q. What trends do you see happening in residential and commercial construction?
Chris Fisher, Managing Principal, Ducker CarlisleDucker Carlisle
Where you see opportunity is when you look at regional or state level. The southern states have high levels of demand for housing [and] housing construction costs are a bit lower, so you'll see growth in single family in those regions. As a contractor, I'm thinking about geolocation emphasis of opportunity and single family developments and then the return to multifamily probably later in 2025 because of the gestation cycle of a multi family project and the funding mechanism as interest rates come down.
In commercial, there's a couple areas we'll still see continued growth:
- Data centers is a significant category where you need a very specific building type. You need a very specific power generation base, and we're going to see continued growth of new facilities in data centers.
- The reshoring or optimizing manufacturing locations probably later in the term.
- Growth in manufacturing both small, medium and large manufacturing facilities, as the emphasis is to produce or make in America or make in America with supply chains.
- We're anticipating growth in what we call sort of recreational hotel, motel and other areas because we've been spending on experiences. We've been to go back to build even for what we see in manufacturing, oil and gas having different hotels and different levels of restaurants to serve rural or urban areas.
Q. The pandemic saw a growth in decorative concrete as homeowners invested in improving their own homes. With growth in residential construction, do you think we’ll also see a similar growth in the decorative side and outdoor living areas as well?
Absolutely. I think coming out of COVID, one of the hottest areas of the construction industry was outdoor living. There was a demand from hardscapes to landscapes to pavers to concrete staining and decorative areas for outdoor living was significant. We've created an expectation for our home owners and renters and homes to have a beautiful and active outdoor living area. That will continue through, I would say the next decade as that's a design and living preference because we still have a lot of work from home. A lot of people are still working from home or pursuing a balanced mix - that outdoor living is important.
The other thing to consider is that as interest rates come down we will re-engage the existing home sales market. One of the ways to attract a higher price if you're trying to sell your home is to optimize your outdoor living environment. We've seen that in paving sales or pergola sales etc. When homeowners purchase a home, the [following] 24 months is a huge spike in home improvement spending and they typically are doing kitchens, baths, and outdoor living activities.
Those are two areas that I think will continue as we see the impact of lower interest rates and allows people to move.
Q. Are there any trends anticipated to go down at all?
I think there's a couple. In terms of the risks, there's several risks to watch. Now, the impact we don't know yet, but - again - the construction industry is very much a localized market. In a market that doesn't have an optimized mix of population, good levels of employment or GDP and investment for growth, then you might be on a decline of the market, because of the lack of a lack of demand - even though interest rates may be getting better or overall the nation is improving its GDP outlook. That's something to look out for.
The other is if we don't pursue the immigration and border strategy correctly. A deportation event that impacts construction labor significantly will reduce the number of projects started and or completed or defer them further.
It is my belief that there'll be targets that are more in urban areas or of criminal background nature not going after a significant construction trade group at this point. But we don't know until we start to see that happening. That's certainly a risk.
Historically, within the construction industry, it's been levels of demand which have the biggest cycles of demand and how steep the curve was creates the biggest implication. But we don't. We've just been through COVID and came through that all right. We've just been through a high inflationary environment and we're coming through that, all right. Now it's an even keel level of demand, it will seem satisfying to most.
Q. What advice would you have for contractors to follow that demand if they are in one of the markets that aren’t seeing high growth? What might be some advice for the contractors looking to expand their area?
I think a lot of contractors do that today because it's been happening over the years, as we've seen higher population and density of home construction or building construction occurred in the South – for example Florida, Georgia, the Carolinas, and Texas - but it's really around a contractor either building a partnership with another contractor in a different market that has high demand.
Oftentimes they may be limited on labor, and so you can work with and build partnerships. You can go acquire a contractor in a different high demand market. Or you can enter a new market yourself and build a build relationships and win business there.
The trick is to do your homework on looking at those local markets and where you feel you have the best opportunity and what fits with your business and culture.
Q. How do you think the next four years of Trump's administration will affect labor in construction?
The demand outlook and increased levels of activity in construction across all levels of residential, nonresidential, and infrastructure creates a rising tide that lifts all boats. That creates an opportunity to attract labor into the trades at the same at the same time we were starting to see. It'll be further expanded under the administration in a respect and appreciation for pursuing the trades as a career for life vs. necessarily having to follow the historic path of university/college or 2 year and participate in in office environment job.
Now, we've got a premise of either blue collar or construction trade and very specialized skilled craftsman is something that is worth investing in and building as a career and recognized and set up further than it was maybe years before.
I think that's those are positive and different than what we've had before. The risk is if we go too far, too fast we take too much of the immigration pool or labor pool out. That will be a disruptive event for the industry.
Q. Are you optimistic for 2025 for construction?
Absolutely. I have been in the industry for almost 30 years, we haven't had a series of positive trends and dynamics all converging at once.
We've got inflation of materials coming down. We've got interest rates also coming down. We've got a lending market opening up - especially for bigger projects. We have an administration that is looking to reduce regulatory influence on project or project execution. We have an optimistic consumer who also has some level of good financial capabilities to move or spend - which is very healthy for the industry. We've got some level of domestic infrastructure needs. We have this tailwind in infrastructure spending. If you look at the bond passage for a lot of communities in the last 12 months or 2 years, a lot of those bonds are going to be fueling continued projects.
All of those create a very favorable and optimistic environment for the next couple years.
Q. Are there any other issues that you would like to comment towards? Any final thoughts?
What's interesting is that people aren't talking about sustainability as much anymore. It's been important but in the last 12 months, you're not hearing much about that anymore. You're not seeing the legislative priorities, other rebates, of focus on sustainability or energy efficiency or renewables. That's something to watch for.
It may come back, but that's not a priority as it once was. That changes the dynamic a bit of how we build and what we build in the construction industry.
I think you'll see different levels of investment in areas and will take a longer. It’s like we're seeing in the automotive industry with EV production and mandates, those will be looked at, but we still need to have clean air in our buildings, we still need to have energy-efficient operating facilities of buildings. We still have climate impact of storms on homes and replacement. It's just a different a shifting perspective for the long term.
