Name: The Construction Economy Outlook Fall 2025
Uploaded: 2025-11-13T20:00:05.321Z
Duration: 2 h
Description: The Construction Economy Outlook Fall 2025

Transcript for "The Construction Economy Outlook Fall 2025": Good afternoon to everyone on the East Coast, and good morning to our friends out West. Welcome to the construction economy outlook fall twenty twenty five. The Economics Group at ConstructConnect is, again, proud to deliver, our construction economy webcast series in collaboration with the American Institute of Architects and the Associated General Contractors of America. My name is Paul Hart. I am vice president for economic content here at ConstructConnect, and I'll be your moderator for the program today. We'd like to thank our presenting sponsor, ConstructConnect News, For regional and sector construction forecast, reporting on data centers and megaprojects, full coverage of the project stress index, and economic analysis on the construction economy, visit news.constructconnect.com. We are once again very fortunate to host a panel of top experts on the North American construction economy. Here's what we're gonna cover in the next ninety minutes or so. Kermit Baker, chief economist at the American Institute of Architects, will discuss current economic challenges and issues in residential construction. Kermit will also walk us through the latest results from the American Institute of Architects (AIA) Deltek Architectural Billings Index and the American Institute of Architects (AIA) Consensus Forecast. Ken Simonson, chief economist at the Associated General Contractors of America, will discuss current employment conditions, recent trends in construction inputs pricing, and the impact of tariff and trade policy on construction. Next, ConstructConnect's director of content acquisition, Kristy O'Brien, will explain the trends our reporting teams are observing in new and bidding projects in The US and Canada. Then Michael Guckes, chief economist at ConstructConnect, will dive into the latest numbers in the Project Stress Index and reveal our latest construction starts forecast for The US and Canada. Following Michael, we'll have our panel answer questions that you submitted when you registered for this webcast. Now a few housekeeping items before we begin. The number one most popular question we get every webcast is, will the recording of this presentation and the accompanying slides be available? Yes. Everyone who registered to attend the webcast will receive an email in the next twenty four hours with links to a recording of the webcast and the accompanying presentation slides. Please keep an eye out for that email. Now if you're having any technical problems or need assistance with viewing or hearing the presentations, please use the q and a panel on your webcast screen. We have a team of colleagues standing by to help with any technical issues you encounter. And we ask that you reserve that q and a feature for relevant questions, technical questions for our production teams. Also, in your webcast window, you will find a tab that says docs, DOCS. In that d o c s tab, you will find links to key resources to help you stay on top of construction economy, and I'll explain some of those later in our program. Now we are once again very proud to say that this webcast is registered with the American Institute of Architects for continuing professional education. If you are an American Institute of Architects (AIA) member and you submitted your American Institute of Architects (AIA) member ID, there that number when you registered, the record of your attendance will be submitted to the American Institute of Architects (AIA), and they will take it from there. You will earn, 1.5 continuing in continuing education learning unit credits. Alright. With that, now it is now time to put down your pencils and close the other windows on your machines and listen very closely to the next four presenters on your screen. The level of authoritative insight from these experts cannot be overstated. And our first panelist is one of the leading experts on housing in America, having served as the project director of the Remodeling Futures program at the Joint Center for Housing Studies at Harvard University for twenty six years. Doctor Baker, chief economist at the American Institute of Architects, originated the American Institute of Architects (AIA) work on the board survey. That's a monthly assessment of business conditions at architecture firms and the source of the widely followed American Institute of Architects (AIA) Deltek's architectural billings index. And it that's an essential metric for anyone with interest in US construction. And as if that is not enough, Kermit also coordinates the American Institute of Architects (AIA) consensus forecast panel as well. Kermit, it is always great to see you. Thanks for joining us today. Well, thanks, Paul. It's great to be, joining you and the team again here at this, critical time for the construction industry. Let me let me launch in, Paul, and let me, start by discussing how the outlook for the economy has changed over the course of the year. So every quarter, the Wall Street Journal surveys a panel of leading economic forecasters to get a sense of the outlook. In in January, you can see the forecasting panel was recently optimistic. In April, the, the group turned very pessimistic. In the July survey and now with the fairly recent October survey, their outlook has moderated a bit. The big change, the indicator with the biggest change over the course of the year has been the employment outlook. Forecasters are much, looking for a much weaker jobs outlook than they did earlier in the year. GDP, inflation, interest rates haven't changed a lot. Currently, as you can see on the bottom, there are a moderate probability for a recession, over over the coming twelve months. Long term interest rates are, critical critical for construction, and long term rates have been, fairly volatile, due to concerns over inflation, recently. So, when the Fed be cutting began cutting short term rates last fall, that's where I have the first line there, it didn't really help long term rates. In fact, they rose a bit over the period, right after the Fed cut short term rates. Long term rates in here, I've got fixed rate mortgages are more determined by expectations for inflation. And right now, expectations for inflation are in a considerable flux. So as the Fed continues cutting short term rates, it's unclear what impact it'll have on on long term rates and mortgage rates, more specifically moving forward. Recently though, the the the news has been positive. You can see that, mortgage rates eased about a half a half a percentage point, in in in recent months. So mortgage rates are often cited as the key reason that prevent households from purchasing a home. Common question is, you know, at what rate would households consider purchasing? What rate would they be willing to move back in? And obviously, the answer is different for different households. But fortunately, there was a recent survey that asked this question of potential homebuyers, households that were interested in trading up, renters that were interested in buying, to tell them, what rate they would consider to be appropriate or acceptable to move ahead with purchasing. And this is the distribution here. About half of respondents said that 6% was a a good enough figure for them to get in the market, and we're getting very close to that figure now. And if we move down another percentage point to 5%, most household would would be happy to get engaged in the market. You know, housing recovery is really, central to, the health of the broader construction industry, but, little could be done at the federal level to solve the housing problem. However, in, early, early October, just, just about a month ago, the senate passed a rare piece of legislation aimed at easing the housing shortage, and that was called the Road to Housing Act. And and what it does is it directs HUD to develop best practices to provide municipal government with options for increasing housing production at at the local level. And by federal standards, funding for this program has been reasonably modest. It was more to provide ideas and and programmatic suggestions for municipal government to move forward. Different places, given this problem, different places have been dealing with the housing supply problem very differently. So, for California, for example, it has greatly eased the ability of a homeowner to put an additional unit, what are what's called an accessory dwelling unit on a single family lot. They need very little in the way of, permission to do that. And these have become these ADUs have become quite popular. John Burns Consulting reports that, you know, in California, ADUs accounted for almost half of new single family units last year. And as you can see in this chart, that's up for up from just 5%, seven years ago. And New York, has taken a very different approach to the problem by using the oversupply of office space to help offset the lack of affordable housing. And so by helping to streamline the conversion process, the number of office conversions has picked up, steam, quite recently in the New York area. So about, an estimated 10,000 new housing units have been added in Manhattan, alone since, 1992 from office conversions. And almost that many have been proposed for future conversions over the place. This pace of growth is even gonna continue. In fact, building conversions, have been a very popular strategy for creating housing opportunities as well as, for utilizing under underutilized buildings. So there were over 25,000, multifamily units created last year from, other facilities. That number, as you can see, has been growing quite rapidly. Now 25,000 may not sound like a lot in terms of the national needs for housing, but it is a start. And and the numbers, as you can see, are growing rapidly. Last year, these conversions accounted for, still single digits, a little over 7% of all multifamily units built, nationally. And while office conversions are, you know, to multifamily have received the most attention, in fact, hotel conversions to multifamily have outpaced office conversions for the last two years. Also, other building conversions like, industrial and warehousing facilities, schools, and other commercial and institutional facilities also account for a significant number. Last year, about 40% of apartment conversions last year. And and, again, many more are currently in the pipeline, so these numbers are gonna continue to grow. So, yeah, in fact, in general, reconstruction activity is grow a growing share of the overall construction market, not just in in in housing, but throughout the nonresidential building detector. So we regularly survey architecture firms as to what share of their billings come from reconstruction projects. And as construction activity has slowed and our building stock has aged, reconstruction work has increased its share. So, over the past two decades, you can see here it's grown from a third of billings at architecture firms to, fully half of billings at present. And virtually all architecture firms worked on at least some reconstruction projects over the past year. We recently surveyed them regarding what type of reconstruction projects they had worked on. And as you can see, all the major, sectors were covered in terms of projects that firms had in fact been engaged with. Over half of firms had worked on office projects as the largest number there. That's likely due to the weakness that, that that market has, encouraged more conversions, overall as well as the upgrading of office buildings to attract a shrinking base of companies looking for office space. Education, also very high in the list with a third of firms working on college and university projects over the past year, and almost as many, as large this year working on k 12 projects. Now what kind of reconstruction work is being undertaken? So we asked firms, the principal goals of the recon reconstruction projects that their firm had worked on over the last few years, and they could list most multiple goals if appropriate, if it will if different projects at a different, specific target. So modernizing and aging building stock capitalist, modernizing interiors, upgrading systems, upgrading exteriors, adaptive reuse and conversions still ranked high. Not quite as high as it did immediately after the pandemic, but still a very, common motivation for that. Let me turn now to what, architecture firms tell us about future conditions in the construction sector. These are, numbers, that Paul mentioned from the American Institute of Architects (AIA) architecture billings index. And as of the September numbers, they continue to be, quite disappointing. Any score above 50 indicates an increase in billings. Any score below 50 indicates a decline. And architecture firms have been reporting sluggish, levels of activity since the 2022, so, for over three years now. Recent numbers haven't shown any improvement and still point to continued easing and building in in billings at architecture firms. But we do track other, indicators, national, indicators, in our ABI survey. One of those is a new projects coming into architecture firms, what we call new design contracts, as well as inquiries for potential future contracts. And new design contracts, as you can see with that teal line, have been just as weak as billings, so they don't point to a turnaround anytime soon. Inquiries for new projects have been have done better. They've been, at or above this, significant 50 threshold line for five straight months, and we interpret that as, you know, there is interest out there for new projects, but still too much uncertainty in the economy to to move ahead on that. Let me, end up with our consensus construction forecast. This is a survey of the leading construction forecasters nationally that we do twice a year. We we we published our midday midyear update, in July. We'll be, publishing a a new version, in January. And the overall takeaway for the outlook for remainder of, 2005 and into 2006 is very, very modest growth, probably not even offsetting inflation since since these are not inflation adjusted. Little slow pretty slow on the commercial side, negative for manufacturing after very strong growth, and and looks like another round of growth getting underway. But spending, these two years seem to be fairly weak and a little better on the institutional side. And let me follow-up with the final two slides, which look at a little bit more of the detail here. Here's on the, commercial side. And and we've added a new cat a few new categories to our forecast recently, data centers, which are a subset of the office market, and warehousing, which is a subset of retail and other commercial market. So the office market is, is showing growth only because of data centers. If we netted out data centers, the office spending on office, facilities would be declining. Retail and other had been buoyed by warehousing, a few years ago. However, as you can see, the warehousing numbers have slowed down and and, the overall category in warehousing are fairly similar. And then hotels, a little bit of growth there. And then finally, on the, institutional side broke broken out the major categories there. Health and education account for about 60% of this. We don't report all the categories in the institutional market. But reasonably healthy growth, projected for both health care and education, almost at the mid single digit level. Amusement and recreation bounced back, this year, with, some delayed projects from the pandemic, and looks like that's gonna slow down, moving forward. So, let me leave it there, Paul, and and turn it back over to you. Thanks, Kermit. Thanks so much. And before you go off stage here, let me take one minute and say thank you for your participation in this webcast series. None of us are quite sure exactly when the first version of this webcast began, but we know that Kermit was there. I joined the program somewhere around twenty fifteen ish, and Ken and Kermit had already been on the show for a few years at that point. And Kermit has been along for the entire series from the very humble beginnings. This is doctor Baker's final appearance on the construction economy outlook, webcast as he will be retiring at the end of the year, and we were very grateful for your dedication to us here. I'm incredibly thankful personally for your patience, guidance, and good counsel you have afforded me over this past decade plus. And and on behalf of everyone here at ConstructConnect, congratulations, Kermit. We wish you a wonderfully adventurous retirement. Well, thanks, Paul. It's been a pleasure working with the entire ConstructConnect team. Michael and Ken cover up all the errors I make, so it's good to be on on on this event with them and just really appreciate the ConstructConnect team for what they've been able to to build up with this event. Well, thanks for your we wish you all the best, Kermit. Thank you. Thanks. Okay. Now finding, hiring, retaining workers has been a challenge for the construction for over fifteen years, but really much longer than that, probably back to ancient Egypt. And it is exceedingly clear, that this issue is not going to fade away anytime soon. In times like these, you want to hear from the country's leading expert on that subject. Ken Simonson has served as chief economist for the Associated General Contractors of America (AGC) since 2001. In addition to his work at the Associated General Contractors of America (AGC), Ken advises the US Census Bureau on overhauling its construction data, and he is fellow and past president at the National Association for Business Economics. And, again, in his spare time, he also is co director of the tax economists forum. So, Ken, glad to have you here. Many of our audience members, like we'll do a shout out here. Like Jeffrey Bowman from Conoco submitted questions about materials and labor cost, what you refer to as input cost to construction. This seems to be a prevailing concern for the industry, and I'm glad you're here to deliver insight for us. Thank you for taking the time to be with us today. Oh, Ken. You may still be muted. Is he still muted? I believe you may be muted, Ken. Well, thank you, Paul. Very good. And first, let let me echo what you said about Kermit. It's been an honor to be on programs with Kermit, and, I've learned a great deal. I feel like I'm still a newcomer after only twenty four years compared to Kermit's thirty years. But, it's also a pleasure to be back on this program. I've been doing these with Kermit, I think, for about twenty years under, various company names. And, what I wanna talk about today is what's going on with employment trends, materials cost trends, the outlook for different segments of construction, and also how policy is likely to affect those things. So, to go through this very quickly, this first slide shows that, total construction employment, shown by the black line, has been tapering off pretty steeply over the past three years. This is a year over year change in, employment, first in green for, the total non farm segment. That's the headline figure we used to hear about and I hope soon we'll be hearing about again from the Bureau of Labor Statistics. They actually report on five segments of construction, and I've consolidated those into two. The blue line shows residential construction has gone negative. That is the industry has been shedding jobs on a year over year basis since early this year. Nonresidential construction continues to add jobs at a rate about twice as great as total nonfarm economy, but it's also slowed down a lot. And, the the slowdown is occurring in most parts of the country. The number of states that had an increase in construction employment from August to August, is still more than those that had a decline, ones in pink and red having decline, green an increase. But only 28 states had an increase in the last twelve months. A year before that, it was anywhere from 35 to 45 states. And the weakness is showing up, as before, on some West Coast states, now all of those plus Nevada, and all of, the Northeast, or, except Pennsylvania, but also in the, Rocky Mountain states and, through some of the midsection of the country. And for the first time, some Southeast states also losing employment. We get one other measure, and this did come out, the day before the government shutdown. So it it's, relatively current. It shows, as a series going back to 2001, the percentage of the workforce that was hired in, August of each year. And that did tick up from 4.1% in August 2024 to 4.3%, but that's still, if you trace that red line back across the twenty five years, the third lowest level in the history of this series. Meanwhile, job openings shown by the blue line as a percentage of open and filled jobs on the last day of the month, plunged by 38% and been dropping for three of the past four years, not to a record low. But nevertheless, together, these two series suggest that, firms are not hiring. They're not even advertising jobs right now. And, that might sound pretty ominous, but they do remain optimistic that there will be more work in 2026. Layoffs as a percent of the existing workforce have stayed at a very low rate as shown by the gold line. And then finally, quits, very low also, suggesting that workers don't see an opportunity by jumping to another construction firm or by leaving construction for other industries. And all of this is consistent with a survey that Associated General Contractors of America (AGC) completed this summer about companies' workforce experience and expectations. How a firm's been able to bring in more workers in the broader economy? Simple. They pay more. There's a series that comes out with the National Employment Report called Average Hourly Earnings for Production and Non Supervisory Employees. Easy phrase for average wages for craft workers and office workers who aren't supervisors. And, you can see that that series has stayed above a 4% increase for several years now. In fact, in the broader economy, the total private sector, this series for average hourly earnings for production workers is now below 4%. So construction is spending more to entice people to come and work in construction and stay in the field. We get two other measures of what's going on with pay. Associated General Contractors of America (AGC) and about 10 other associations support the Construction and Labor Research Council, which analyzes union settlements. And they reported that in the first nine months of this year, the first year settlement, was up about 4.7% on average. That was the same as last year, but certainly a lot more than the contracts that they were replacing signed in 02/2012 that had two to 3% increases or perhaps were flat for the first year. We also, get figures from a consulting firm called PAS, which finds that salaried employee that firms expected their salaried employees to get raises of 4% this year, but that historically, those early year estimates come in three to five tenths of a percent low. So whether you're looking at the BLS numbers or these private sources, it looks like, pay will continue to go up more than 4% through this year and probably in the next year. How about materials cost? Well, here, things still look mild. And, again, the latest figures we have from BLS are for August. Two tenths of a percent increase in the PPI, producer price index, for inputs to new nonresidential construction. That's a weighted average of all materials and some services that go into construction. Went up two tenths of a percent from July to August. Two and a half percent from, August, August. Seems mild, even milder than the CPI increase of, 2.9%. But a year ago, those prices were flat or even falling compared to the same months of 2023. So I think we have moved away from flat pricing to, moderate, say, two to 4% price increases. I just got a notice earlier this morning, for instance, of, increases for steel pipe. And in fact, tariffs have certainly pushed some things up much more. 25% tariff on steel and aluminum in March went to 50% in June, and you can see the impact, the PPI. And the PPI is based only on domestic producers, but they're certainly aware of what their foreign competitors are having to charge. So aluminum mill shaped, producer prices from domestic producers now up 23% year over year, and steel mill products up 13%. A tariff of 50% went on copper products, not raw copper, but copper embedded in, insulated wire or, motors or electronics. And, that started at the August. These prices were collected on August 11. Lo and behold, the year over year change already at plus 4.9%. And then machinery and equipment also, which includes a lot of steel and copper, starting to go up. So some things will go up much more. How about construction spending? These data look really old, and I'm hopeful that the Census Bureau will be able to bring us at least the August estimate, promptly because, they had it ready just before the shutdown on October 1. But at any rate, you see the same pattern as on that employment slide, a steep decline. And in fact, in the last several months, the year over year change in both private, nonresidential and private residential construction hasn't been negative. Public construction's still growing, but at only a 3% rate compared to 10% a year ago and more than 20% a year before that. So, quite a widespread slowdown, but not universal. I call this slide my checkerboard because it's got an almost equal mix of black and red squares, where the black ones show a year over year increase in construction spending and the red ones a year over year decrease. So looking across the top, total spending down almost 3%, residential down 5% including a 2% decline in single family, 9% in multifamily, 8% in improvements. Now I think we may be near the bottom on single family and multifamily, but, the starts for multifamily will be showing up, on a kind of a staggered basis depending how quickly the overhang of a product really recently delivered to, major growth areas, how quickly that gets absorbed. And single family really depends on what happens to the thirty year fixed mortgage rate. Couple of hours ago, Freddie Mac told us that, that rate was staying at, just about six and a quarter percent as it has been for the past several weeks. That's a lot better than the seven or nearly 8% that we saw, earlier, but not low enough to bring first time homebuyers back to the market. So I think any recovery in residential will be pretty slow and modest. On the nonresidential side, it's almost flat as the public gain, doesn't quite match the private decline. The rest of the slide shows the categories as defined by the Census Bureau and listed in descending order of July 2025 size. The largest category, manufacturing construction, was formerly also the fastest growing category. But there's been a stretching out of some of the computer semiconductor fab plants. There's been a cancellation or conversion or, slimming down of some of the, electric vehicle and, battery plants. Offsetting that, we are getting huge investments in pharmaceutical plants and in liquefied natural gas, liquefaction trains, as they're called. These both fit in that chemical category. So a very mixed story in manufacturing. Tariffs may help some manufacturers, and certainly we've seen dramatic announcements by some CEOs and even heads of state about investments that they'll be making. But those often are lacking specificity as to time, place, or purpose. So I'd say what you see on Truth Social may turn out to be Truth Partial in terms of new manufacturing investment. And meanwhile, other manufacturers are holding off because they wanna see what their competitive position will be once they have to pay tariffs on their own inputs, not just on the manufacturing construction costs, and also whether they're going to face retaliation or discrimination from, foreign competitors. The next biggest category, power construction, I think does have a bright future. There is a tremendous investment going on in all types of power generation. Right now solar seems to be doing well even though the administration and congress have done away with some of the incentives or permits for it. But, there are also experiments with, or designs for small modular nuclear and for geothermal. So we may see new types of power or at least ones that we haven't seen invested in in a while. But, power also includes transmission, local distribution, and importantly, storage. So huge investment in battery storage at data centers and other facilities. Highway and street construction has barely climbed, and this is a bit of a surprise given the funding in the Infrastructure Investment and Jobs Act. But, I think many state DOTs are now reporting that they're having trouble, finding the funds to match the federal grants. And some federal grants have been, terminated or at least the administration has tried to terminate them. Those may be litigated, but nevertheless, I think highway and street construction growth may be slow in the coming year. Education, you can see higher ed doing well at the moment, but it's the most threatened category in terms of what will happen in construction going forward. The administration, again, has canceled lots of, contracts and grants for universities and other research institutions, also canceled visas or denied them, for the researchers and faculty and students. And the number of domestic students, continues to shrink as the baby bus works its way through the years. So I think universities and colleges will have less reason to add new dorms and classrooms and labs and less funding available for them. Commercial, by and large, I think will still be another weak year for warehouse and retail, although there are some niches such as cold storage, last mile, where you can order in the morning and get it delivered that day, and, a few places around ports where there, may be opportunity for more bonded warehouses or free trade zones. The office market, this is the most deceptive figure in the census press release. Unlike Kermit, they don't break it out there, but they do have very detailed figures that I've taken these from, on another web page. And you can see that the apparent flatness in office is really made up of a 30% spike in data centers, a 17% decline in private office. And that's, likely to continue. Both trends gonna continue in the coming year. Healthcare, quite a mixed picture. I think the growth will be in, special care facilities. This is a catchall name for anything from urgent care facilities near the roadside to stand alone, diagnostic and treatment clinics to long term care to hospices. Transportation, I go through a lot of airports every month, and every one of them seems to be changing out the retail and restaurant options, putting in sometimes adding gates or making land side, even air side improvements. So I think that will continue to be strong. Also, there are a lot of Amtrak related projects for for track and tunnels and terminals in some cities. But overall, I think, other kinds of transportation, notably transit, definitely under stress. So, the rest of the slide shows the smallest census categories, and, I don't see much change coming in those in the next year. Let me finish up, by talking about some of the policy impacts that are affecting construction. First of all, higher tariffs, have, certainly raised some costs, but more important, they've caused owners to put the hold on projects. So, here is just a sampling of the tariffs that have are now in effect, tariffs that have been changed, tariffs that have been postponed. Let me go back to, the list, and, let me start, with a a slide from our own survey this summer. We asked contractors, do they have a project that was canceled, scaled back, or postponed? And 43% said, yes, that had happened with at least one project because of increasing costs. 31% said because of financing issues. Well, these are high percentages, but they're actually down from last year's survey. What has gone up was change in demand or need for the project due to policy changes. That was 20% a year ago, and now it's 26%. And, change and for the first time we asked about tariffs, that was affecting, 16% of the, biz the 16% of the firms answering the survey said at least one project had been delayed. So, to wrap up then, here's a picture of what, the immigration policy is making for, the construction industry. We're much more dependent than the broader economy, 34% versus 18% of the broader workforce. It could 34% of construction trades varies a lot by state. The state's in deep green, California, Texas, New Jersey, Maryland, DC, all 50% or more foreign born. And it varies a lot by craft. So the, building interior crafts, the floor, wall, ceiling, insulation, and roof, very heavily dependent on foreign born workers. But, for construction equipment operators and iron and steel workers and electricians, crafts where you need a lot of training, apprenticeship, or certification, lower than the overall industry percentage. Not many firms have been affected yet by job site rates, and they seem to have stopped after the big Hyundai raid in September. But we think that more are coming because the Department of Homeland Security has gotten tremendous boost in funding and staffing. They're now recruiting and training people, and I think next year could be an active one for affecting job sites. So, to finish, economic growth does seem close to stalling, and I think construction, is even more vulnerable. But most of those categories that I went through are likely to be flat or even declining. The big exceptions are data centers, power, airports, and, some small niches in health care and distribution. The materials costs up two to 4%, but more if you're using something subject to tariffs or competing with tariffs. Labor costs up four to 5%, but much more if your job site gets raided or workers fail to appear because of the rumor of raids. So I'll I'll leave it there. This is a slide that shows population change, but this is pretty out of date by now. I hope Census will be able to update this next month on schedule. But, thank you again for having me back. And if you want more information or want to subscribe to the Data Digest, my weekly summary of economic news relevant to construction, write to me at ken.simonson@agc.org. Fantastic. Thank you, Ken. I appreciate it. And, folks, if you don't receive Ken's daily digest newsletter, that weekly newsletter, I highly recommend signing up for that. So do email him, ken.simonson@agc.org. For contractors in the audience today, if you are not a member of the Associated General Contractors of America (AGC), please visit agc.0rg/y-join. Great organization to be a part of. Okay. Next, I am delighted to welcome back to the Construction Economy Outlook, Kristy O'Brien. Kristy is the director of content acquisition here at ConstructConnect. She was instrumental in developing and deploying the processes that ensure our coverage of the private sector projects is second to none. Kristy and her teams are the ones talking to construction project stakeholders day in and day out as construction projects move into the pipeline. Kristy and her teams are the first to know about them. Kristy, how are things looking out there? Awesome. Thank you so much, Paul. Hi, everybody. I'm happy to be here this afternoon joining you to speak on data transfer reporting as a content acquisition team here at ConstructConnect. When presenting the data, I will be speaking in terms of project count. So trends on the volume of projects our content team has published year over year to date, January through October, to illustrate where construction activity is increasing, decreasing, or remaining neutral. First, I'd like to speak to our United States bid activity. Project bid counts increased year over year, overall up 2.7 with private down 3.9% and public up 3.4. Higher borrowing borrowing costs in 2024 kept private owners more selective with their project choices while public sources sustained much of their funding and project plans. Tariff expansions on all materials added cost and lead time uncertainty weighing more on private than public scopes. In Canada, total bids dipped slightly, but private activity rose. Overall, down 3.4%, private was up 14.9, and public was down 3.6. Private capital still worked despite higher carry costs while some public owners scaled back for budgeting. US, tariff expansions on metals and equipment filtered through shared supply chains, affecting the Canadian pricing. On new US planning projects, so these are projects that are in a pre bid phase conceptual through pre construction. The project pipeline cooled. Overall, we're down 15.3% with private down 26.8% and public down 8.8%. Elevated financing costs slowed feasibility and stretched timelines, meaning fewer first time publications. Tariff driven cost risk on materials further raised capex for manufacturing and complex MEP scopes. We confirmed with many sources on projects that intentions for 2025 planning work came to a halt with the uncertainty of the political and economic landscape, tariffs being cited as the constant culprit for decision changes. In Canada, planning was essentially flat overall, down 1.8 with private down 21.8% and public down 4.9%. So this slide, this shows the six building uses, uses, that are are some of our most viewed by subscribers. So I wanted to take a closer look at how these projects trended this year compared to last. In The US, data centers rose 15.1%, while warehouse and distribution fell almost 70%. Manufacturing fell 31%. Industrial, 8.9%. Arena stadium stadium fell 18%, and then, clubhouse and community centers declined 17.4. Rate sensitivity and input costs hit most private categories while data centers remain resilient on the AI cloud demand that we are all witnessing. Tariff increases raised delivered costs and lead times pushing some starts out, But again, reporting on data centers saw our biggest volume over the last three years. In Canada, by building use, first published count show data centers down 58%, industrial down 10%, and manufacturing down about 39%. Warehouse and distribution also down. Rate conditions and imported equipment tightened feasibility, and then tariff linked cost and supply risks across the country also shape this timing. And and lastly, I wanted to highlight one of many data centers we have been tracking because I know data centers are such a hot topic and highly in demand right now. La OSA, it's a 3,300 acre, 33,000,000,000 AI cloud campus positioned between Phoenix and Tucson. It's targeted to receive full approvals in 2026 for phase construction. So even with high borrowing costs and often community opposition, when power financing and policy align, data center projects are given the green light to build. Within our data set year to date in 2025, we have published future start date data center projects. So this could be next year or years down the road, with a total valuation so far of over $400,000,000,000. So 2025 has proven to be the most active year for data center builds, with or planning them, and, we plan to see more of that in the future. So with that, I will pass it back to you, Paul. Thanks so much, Kristy. I always love hearing the insights from the folks that are talking to the, architects, developers, owners, construction managers out there every day. So great insight. I appreciate it. Folks, Michael Guckes has been focused on construction and manufacturing economics his entire career. Shortly after joining ConstructConnect as associate economist in 2022, he developed the Project Stress Index. Rumor is he's built that on his first day here. The PSI, an early indicator of possible headwinds for The US construction market, has continued to grow in popularity and is now regularly covered in national media. In fact, you may have seen Michael quoted in a great New York Times piece a couple of weeks ago discussing the challenges facing our industry. Michael graciously took on the role of chief economist in 2024 and now leads the development and production of our economic reporting. Michael, I believe you have brought the latest readings from the Project Stress Index and analysis from our hot off the press q four starts forecast. Is that right? I sure have. Outstanding. So great. Well, thank you, everybody. So one of the ways I like to go through all of my presentations, if you've been, one of my participants in the past, is to start from a very broad level and then we'll narrow it down to, the exciting nuanced things. So just starting really, from the top. Right? Looking at GDP, our five year forecast for this, and we work with Oxford Economics when we do this, is, you know, one of essentially modest growth for the foreseeable future. Things were far different. Just six months ago, we had a GDP forecast for this year, closer to 1.5%. Now we're just a a touch over 2% for the year. And then for next year, you know, some modest improvement as well up to 2.3, but nothing to write home about, nothing to get too excited about. Right? Moving down a notch, we see here in my red box, which is always an ominous sign, of course, Population growth is slowing. I think Kermit may have alluded to this earlier in his own presentation, but that is one of the most important drivers of a thriving economy, is to have a growing population. And so when we look at what is happening both in terms of just the long term trend in domestic, natural growth, right, along with what we're seeing with immigration, the the loss of the immigration driver has really taken a toll on population growth. And so that will certainly, impact our outlook moving, into the future. And then the bottom, one last thing to point out here. Neither good nor bad, but just sort of how it is. The ten year government yield, we have it basically fixed right around four just shy of four and a half percent as you can see here. And the reason I called that out is because as was, certainly appropriately mentioned previously, the thirty year mortgage rate is a huge driver of what happens in the residential space. If we don't see significant declines in the ten year government yield, you probably won't see significant declines in those thirty year mortgage rates. And so, to the degree that we see rates generally staying close to where they are now, I think that that is baked into our forecast, and and that certainly does, restrict some of the growth we might otherwise see on the residential side. If we break out the data, this is really interesting. If we look at what happened over the the 2025, and that is the two rightmost bars here, you know, we can see a lot of rock and roll. We saw a lot of changing in how companies dealt with the tariffs. We saw a lot of firms front loading inventories, coming up to Liberation Day in April. And then we turned around and we saw, then basically selling off those inventories that had they had front loaded in the first quarter, and so that had an opposite effect there on GDP. The interesting thing about all of this is that the orange bar in this is your private consumption. That is close to 70% of your economic activity, and and it's also a measure of the broadness of, economic growth in in The US. Right? If you want to see your private consumers, all 300 plus million of them, right, consuming and and growing their consumption, that's the broadest, probably the most durable way to grow the economy. And what we're not seeing this year is that what we've seen instead is a lot of investment into AI that made up over half of GDP growth this year according to the Economist Intelligence Unit. So the way that this sorry. The way that the economy has grown this year has varied tremendously from past results. And then this is just a quick look at at what I think Ken Simonson was alluding to previously. Our numbers are just a a slight bit different, but looking at year over year changes in construction materials, our numbers closer to five, percent plus. And you can see how that number, the the far right of your screen again, has shot up for, a substantial amount of time. After COVID, we saw supply chains, essentially healing, for lack of a better word. We saw prices, essentially, coming close to flat, if not even a little bit down year on year. So those were all good signs of an economy that was rebounding and a supply side that was, you know, just reestablishing itself after such disruption. The interesting thing about this is that I would take you all the way now back to the left side of this. Look at what happened in 2018 and 2019. During that time, during the first Trump administration, we had 25% tariffs on aluminum and steel. We had some other, trade, tariffs and whatnot changes occur. And what you saw there was, again, construction material prices increased as high as 8%, and that was for a much narrower range of of, materials in the construction field, and you can see what happened there. So the reason I I I wanna point out both ends of this chart here is to say, you know, well, we're at 5% now, and what we're seeing, being done in terms of trade policy is much more aggressive this time around. So, you know, will we stop at 5%? Almost certainly not. Will we get to 8%? Will we get higher than that? It is, you know, yet to be determined. But my point is is that we are at early innings when it comes to construction material prices and where they could go. The last point is I would absolutely agree with what Ken said regarding wages. You know, 4% plus is is where we've been for a long time. I think that as we continue to change the structure of our, unauthorized workforce here in The US, that will only put additional upward pressure on wages. So we see, you know, construction costs increasing on both sides. As Paul pointed out now, I wanna dig down a level deeper into some really specific things from ConstructConnect. And one of those, of course, is the project stress index composite. If you follow this at a at the headline level, right, a 104.9 is a fantastic number. What it tells us is is that the number of projects that have been bid date delayed, put on hold, or abandoned is only about 5% higher than what it was in 2021. And so that's a very encouraging number. The challenge is that what underlies this is that abandonments have taken over, in terms of the driver of the index. Back in 2021, all three of these measures were were, I think, far far more equal in their ability to drive the index. And what we have seen really this year is that bid date delays and on hold have played almost no role in what is driving the index. In fact, those things would put us below a 100 easily. What we've seen, of course, as you can see by the bright orange line is that abandonments this year have really driven, the the PSI, and so that is a concern because we see the abandoned projects. Again, abandoned, meaning projects that are abandoned in their preconstruction, project or not mid construction. We don't track things that are occurring post, breaking ground, but this is a concern for us. And then when we break out the abandonments by sector, you can see exactly what has happened here. So the private sector was very quick to respond to respond to the, Liberation Day tariffs. We can see that it took about two months or so for projects that were maybe questionable in their ROI. They basically were the ones that were pushed aside. The owners and developers, our interpretation would be that they looked at those projects and said the the profit, the payoff is already questionable with rising cost. This project no longer has a path forward. And then, of course, we see much more recently in August and September. We saw public projects, see their own separate surge in abandonments. Some of that might have been due to tariffs. Some of that might have been due to other legislative, engagements and endeavors such as trying to make government more efficient or simply cutting the cost of, government expenditures. So so there are a couple of different factors that are driving the PSI, and you don't wanna just look at the headline number. Alright. Moving down to another, monthly product that we now are putting out. It's our this is right off of our our mega projects, our monthly mega projects report. This is very interesting. 2025 has been an incredible year for mega projects, and we define mega projects as all projects with a a $1,000,000,000 or greater total construction cost. And you can see here through September, total mega projects, amounted to about a $134,000,000,000 of total work. That is $43,000,000,000 or, yeah, $43,000,000,000 or 47% greater than the $91,000,000,000 we saw this time last year. And, of course, if you also will notice, right, last year was a record high, and this year is blowing away last year's record highs. So the impact of megaprojects on construction simply cannot be underestimated or underappreciated. This has had a huge impact. When you think about Kristy's numbers, right, Christy pointed out that project counts have been down this year in a lot of different areas, and yet spending has been relatively strong. And this has a lot to do with it. Right? Our current nonresidential building number suggests that, you know, we're up about 50 to $60,000,000,000 in total starts this year compared to last year. But most of that increase rate is, as we can see, due to things like mega projects and data centers. And speaking of data centers, this is what we've seen, you know, thanks to our content team and and Kristy and and all that that she does along with her associates. Right? We have seen data center construction starts double almost every year, since 2021. Right? We've seen, you know, $7,000,000,000 in 2022, $14,000,000,000 in 2023. Last year, we saw, almost $27,000,000,000 in total construction starts. Now here through September, we've already seen '33, thirty two point nine billion dollars in total construction starts. But in working with Christie, earlier this week and and with our other content experts, you know, when we look at all the projects, all the data centers that have yet to break ground but are scheduled to break ground, later this year, you know, we see huge potential. It could be yet another year of doubling growth. So we'll have to watch that carefully. But this is a a huge trend, that everybody is fully aware of. It's just hard to get the numbers. So so I wanted to put this out here for everyone to see, you know, where we are headed. And then as Paul pointed, I promise to get to our forecast. So our forecast, just like Ken and Kermit were saying, a little bit more modest than maybe many of us would hope for. We see, this year, basically flat for The US in terms of total, construction starts in Canada right now. Looking year to date numbers plus what we are forecasting, we're gonna be down not quite 11%. Next year is a very unimpressive year for the most part here in The US. Right? Up 9%. So less than 1% growth in total construction starts. In Canada, it's it's up 2.2%. I think as one of the previous, speakers noting now, consider this in light of inflation. Right? If we see four, five, 6% inflation possibly in the construction center, in the construction industry. Right? But we see 1% growth or 2% growth. Right? That is a a a, in real terms, a contraction. Right? What we see in '27 through '29, right, is a it's kind of a resumption. We get out of this slump, and and we get closer to, long run growth trends. Right. And this is our breakout here for nonresidential building. Right. So just to to help everyone understand, nonresidential building plus civil construction, which we'll look at in a second the total of those is total non residential construction and then when you add residential construction to that that's where you get our grand total number right so looking underneath that grand total number you can see that non residential building Again, it's it's really probably the more one of the weaker parts of this. Right? So we see it, decently up here in The US. Again, that's a mega project and data center story. But in the the, you know, near term of our forecast, we see some real challenges there. Manufacturing is is a big part of why we see a a down 6.7% number in The US next year. In Canada, it's a whole host of of challenges, right, dealing with the changes occurring in The US and the impact that that has on their manufacturing and and the other major segments of their construction market. And then again, you know, that, challenge is is prolonged in Canada actually in a in a sort of a unique way. So in 2027, we also see some difficulties there before growth, resumes on the, on the back end of our forecast. And then here, again, last slide on on our five year outlook. So this is US injury, and this is civil construction starts. You can see here pretty decent in The US looking ahead. Right? Plus three, plus 4% growth, fairly consistent. So we're pleased about that. In Canada, we see a bit of a rebound, and this may, this is a bit due to the way that I think we see how Canada is positioning itself to protect its growth and to protect its economy through some of the, government programs that have only very recently been announced. But we're looking at tens of billions of dollars of, government, ideated projects in the pipeline for 2026 and beyond. And so we are encouraged, to see that because that will certainly bolster those Canadian numbers. And then lastly, you're getting down to the end for me. One of the things I always talk about in our presentations is you have to look at the right combination for your your company of geography and also subcategory. And the subcategory, table you see here on the, vertical axis. Right? This is only some of the near 30 subcategories that we're tracking, but it's so important. When you're building out your revenue forecast and your your company strategy, you need to be considering your geography and and the subcategories that you're going to pick. And the reason being, of course, as you can see by this kind of a chart, there are definite winners and losers at the subcategory level. Right? We see power infrastructure, military hospitals and clinics, even single family next year doing quite well, growing well above the rate of inflation. On the other end of this, right, we see, like I said before, manufacturing, that will see a sort of return to long term trends after having a fantastic twenty twenty five government offices. That, again, a story of government efficiency and changes in government spending projections. And then some of the other projects on the on the biomen here, airports, dams, canals, marines, a lot of these had incredible years here in 2025. And so a lot of this just gets back to, long term trend. So thank you, everybody. If you want to follow me on LinkedIn, and always feel free to, email me at ConstructConnect dot com. Fantastic. Thank you so much, Michael. Great information a lot in a short amount of time. It's wonderful. Everybody remember, we will share the recording of this webcast as well as the presentation slides. You'll get an email about that in the next twenty four hours from the, Goldcast webcast platform, so you'll be able to access these slides. Thank you, Michael. That was fantastic. So before we head into q and a with the panel, I I wanna very quickly share a few resources that everyone can take into the new year. Links to all of these resources are under the documents section in the webcast interface. Look for docs, d o c s. Click on that tab up there, and you can get all of these resources. Now ConstructConnect news is the platform for project stress index, our monthly mega projects report, our monthly data centers, report, and daily features on the economic trends and the projects making the most impact across the country. ConstructConnect news is our presenting sponsor for construction economy outlook series. So after the webcast, head over to news.constructconnect.com. And for our friends in Canada, the leading resource for Canadian construction news is, in Eastern Canada is daily commercial news, and for British Columbia and all of Western Canada, it's the Journal of Commerce. Journal of Commerce has been publishing Canadian construction news since 1911, and the daily commercial news started in 1927. Again, look for the word docs up there, d o c s, in your webcast panel. You can click there, and you'll find all of these resources you can click on. Like, you'll find a link to ConstructConnect's economic insights page. Now the economic insights page is the hub that links to the construction economy snapshot, our latest construction starts forecast that Michael was just talking about that. We put out a p nice PDF report on that, that you can get all the details. The construction economy brief video series, you can find links to that there as well. And we received a lot of questions. We got a lot of questions, hundreds, about specific markets and specific building use categories. Now, obviously, we're not gonna be able to address all of those here on the webcast, especially during the q and a, but we do report on all of those building use categories at the national, state, US, the city level MSA, and county levels. So you can find out more by clicking the link labeled economic resources again over in that docs tab. And, hey, we would love to meet you in person. Shake your hand. Our team is always out on the road, and we would love to connect with you. Next month, we'll be at the building show in Toronto at Booth 1513. Come say hello to us at the World of Concrete, always in Las Vegas, Booth 1563. We'll be in Vegas again in February for AHR, and then we're back to my hometown of Atlanta for Build Expo, February. Then it is back to Vegas for ConExpo in early March. And on March, we'll have a team at AWCI Bill 26 in New Orleans. The team will be at Booth 769, and I will be at the Spotted Cat on Frenchman Street. And you can always find us online. We have excellent session next month about AI powered project discovery and takeoff. Be sure to sign up for that. Registration for the next construction economy outlook live event happening in May is now open. That link is there under docs too. Okay. Now, we finally made it to the q and a panel where our panelists answer questions that you submitted as you registered for this event. So without further ado, I'm always proud to introduce ConstructConnect senior integrated marketing manager, Natasha Saladino, to moderate our q and a panel. Natasha. Thank you so much, Paul. I'll invite the speakers back on stage so we can ask you some questions. Awesome. Actually, we might wanna let everybody know that that Ken had to step away due to scheduling conflict. So Ken is not with us for this, so we're not ignoring him. We don't want anybody to to get mad at us. We all love Ken, but he had to to step away. If you have any questions, we can share those with Ken afterwards. So great call out, Paul. Alright. Everybody ready? Our first question that we have that came in is for Kristy. This is from Michael from, Dialene. Natasha. We would love to learn the session here with a quick final thoughts, tracks and reports final thoughts. large multimillion each of our panelists to provide. us with something that they would like us to remember as we head out the door this afternoon tools you use for or less, if that's possible. reporting, these, opportunities? I'm gonna start with you. Final thoughts for today? Yeah. Absolutely. Great question. So our content team uses a multilayered approach to identify and report on these high value projects. We actively monitor several key channels. So we look at planning and permitting databases at the municipal levels, industry publications, and press articles. But we're where we really thrive, with confirming data is our strong relationships with our with the industry professionals. For validation, our research team confirms critical details from scope to value to timeline to the team. Fantastic. Thank you, Given. how confidential, final thoughts? of these types of projects are, especially those tied to major tech companies. We often cross reference multiple sources and leverage our source relationships to ensure the accuracy. But we do capture, full spectrum from the smaller edge data centers to the hyperscale facilities. We also track projects through all the stages, so from initial planning through, construction. So this gives clients visibility not just to what's being built now, but, what's coming up in the next twelve to thirty six months. And lastly, the the 15.1% US data center growth I spoke to earlier, you know, that's been particularly strong in edge computing centers driven by the, distributed AI workloads that we're seeing, Though we have seen some pullback with, larger hyperscale facilities due to the capital intensity, but, I hope that helps and answers your question. That's a great answer and that's why it's really important that you join us during the spring twenty twenty six webcast so that we can share some more information on the year ahead. Link is in the docs and in the chat. Solid. We have next. question for you Kermit. you, Michael. The, question, your final thoughts for today? has generated a lot of the growth in construction activity recently. Can this pace of growth be sustained? Well, thanks, Natasha. That's the, $64,000 question. And I I think the concern is less about whether this rapid pace of growth, can be sustained or not, but really, is there a bubble forming within, within this sector. And I'll. have to say, you know, what we're seeing now in terms of, you know, AI investment, is very reminiscent of the .com bubble that we saw, you know, twenty five years ago, the housing run up part part of the great recession, fifteen years ago or or or so. And it's yeah. You know, the whole the whole area is really critical to our economy. It's what's keeping this. The the stock market afloat is is keeping the GDP numbers up there. And, you know, I think the question we're answering. asking is, you know, when does, this. market get saturated? A great great way, to, but, wrap up. Wishing know, you think it would be worth, the best, sir. paying attention to that in terms of when do we start to see, of our panelists once again. levels of of, Associated General Contractors of America (AGC)'s know, Ken Simonson, firms begin to, from American Institute of Architects (AIA), and my ConstructConnect colleagues, a little bit. O'Brien, When when do, we get the when do. we start to see sort of investment you very much. begin to ease off a little bit as as early the season, and, I'm very grateful know, to you, everyone may have, peaked and watching may be may spent heading down again. your Thursday with us. That's a great answer. thanks to all of, our friends. at the American Michael, Institute have one for you. Architects and the Associated current interest rate environment, of America for their continued, partnership and collaboration global supply chain and, so many other initiatives. what do you see as Oxford most, critical factors you very much. shaping construction have an amazing group of people? here at ConstructConnect who work very hard to produce and promote this webcast series. I think it really has to, be just consistent could not do this without you. expectations. I think every single one of, us, Julie Riley, is looking at, the construction economy from, a slightly different angle. our senior manager for, economic we're all seeing managing, editor a a little bit of an engine, that's been, Bendidisi. running hot, My personal thanks to a little too, long, Derek Guckes, and and needs to cool down a. bit. Right? And a final I think thanks lot of, to our presenting there, sponsor, right, looking at investment. spending and whatnot. are saying, gosh. You know, if I make a large investment today, And thank you so much for joining us today. thanks for the, spring twenty twenty six edition. of the construction? economy outlook webcast series is now open. cubed, Look for that link you're a, nerd, yep, I suppose. once again, d o c s, You, know, the challenge is. one of, you know, well, what happens to the economy in. 2029? Until? then, When we think about the strength Hart mega Consular, Connect, wishing you a very happy holiday the sake of, and a prosperous New Year. growth, Let's keep building. but those take many years to build. They're going to take a a certain amount of time to operate such that they build an appropriate ROI and payoff for their owner or developer. And the question is really, you know, that's not a a timeline that can be compressed down to between today and, the next presidential administration where everything could possibly change. And that's so that's the real challenge I think that we're facing now is how do we how do we have, owners and developers making, important investments today knowing that the economy and the way that the economy works could look very different come early twenty twenty nine. Thank you so much, Michael. We have a question that came in from Rob Foster from Sun Construction for you, Kermit. The question is, in the event of continued interest rate cuts through 2026, do you see a backlog of private development securing funding and proceeding? So as I, said in my presentation, Natasha, that the the one positive sign we're coming out of, that's coming out of our monthly architecture billings index survey is that inquiries tend to be looking healthier. That that there's more interest out there on the sidelines that ready to step in when when conditions, look more favorable. I I do think though that, I I I I sense the question was, you know, the Fed is, entering a a another cutting cycle. And you've seen two quarter point cuts so far, and I think the sense is we're gonna see several more. And is that gonna is that gonna break the logjam of of of projects entering in because, interest rates would be lower? And I think the answer is not it's not that simple. You know, as Michael talked about in terms of forecast for the ten year, treasury bill, You know, long term rates are are really what supports financing the construction projects. So we should be focusing more on that than short term rates. And as I showed in one of my slides, the, the easing in short term rates, there's not a clear connection between that and what happens to long term rates. That long term rates are much more determined by expectations for inflation moving forward. So I don't necessarily see the the Fed easing, lowering, long term rates or at least not significantly. We'll see unless we see a more dramatic, decline in the rate of inflation and expect expectations for inflation. So, yeah, I I guess the answer is if if rates were to go down, would that open the floodgate? I think the answer is yes, but I think we have very little evidence right now that long term rates are gonna go down. So I think we're gonna continue to have this this problem of at at what rate does this project pencil out or not, and then we may not be there for a lot of projects right now. That's great insight. Thanks so much, Kermit. Kristy, we have another for you. This is from Derek Broughton from AGC. Do you have good data on large construction projects that are in the construction phase or design phase? Yeah. Thanks, Natasha. Absolutely. So my short answer is yes. We have strong coverage of large projects across the full life cycle like I mentioned. So, if you want what's actively in design or under construction, you can see it in one place without any guesswork. You can see that in today's deck, we monitor new planning, publications, activity month over month, split by public or private sector, which is how we keep a clean read on where work is moving before and after it breaks the ground. We also track by building use like you saw, so you can zero in on sectors where activity diverges, like data centers, industrial, manufacturing, like we we've saw. And we publish those trend lines so you're not sifting raw listings to understand where design versus construction windows are opening up. And then practically, that means you can filter your view to large jobs that are in design to line up your pursuits early or pivot to what's already in construction to target those active packages. So, yes, good data on both phases, and we update it continuously. Awesome. For more information, you can click the let's connect button, and you can get in touch with us directly to get more information. Michael, I have another one for you. This is from Christopher from Structor Group. If the economic activity related to the development design and construction of data centers were to be removed from the analysis, how would that change the economic outlook? Yeah. So great question. And, you know, if you think about the graphic I showed during my presentation looking at mega projects. Right? The analysis at the nonresidential building level, which would be a a step down from that. Right? It would be very close. Let me put it to you this way. Right? So through the third quarter, right, we saw the data center starts total $32,900,000,000. That's a 22% increase over, full year 2024 results, so that's great. And if we if we think about where, you know, data centers might go, and I was a little bit, you know, cagey about that only because I had my my orange line pointing to about, you know, $5,560,000,000,000 dollars, which is, you know, a possibility, but it's there's no guarantee of that. Right? But if we think about another $30,000,000,000 in growth. Right? So this would be another year in which we could double, data center starts. You know, well, if you backed that $30,000,000,000 of growth out of our nonresidential building numbers, our nonres building numbers would be about flat for this year. So that's how important, you know, the the data center and AI investment is to the construction community right now. That's great, Michael. Thank you. I have another question for you. I hear about a lot of commitments from around the world to build in The United States but I don't see it in your forecast it's more of a. statement than a question but maybe you elaborate. I can speak to it for sure. So, you know, the 2025, you know, is really tremendous for US manufacturing. Year to date growth is 82%. So that is phenomenal. Right? It's well above long term trends. And this was led by things like the unprecedented $25,000,000,000 TSMC fab project out in Arizona earlier this year. Right? $25,000,000,000. I I think that breaks every record that I'm aware of when it comes to a single project's cost. Maybe, Ken or or Paul, you know, with a deeper history might remember some project somewhere that that's even bigger. But it's a game changer when you think about $25,000,000,000 being put in one location. And when we try to forecast a super mega project like that, for lack of a better term, right, that's not really how our models work. Right? Our models are looking at the macro factors, out there. You know? What is the the big picture economy telling us about construction? And and we try to put those pieces together. Right? So, you know, when we're building a five year forecast, it's it's I think it's more important for us to consider those things because if we try to start guessing when a super made mega project is going to, you know, break ground, that's that's way beyond, the kind of, quantitative forecasting that I think we're capable of doing. So so I think that's important to put out there that we're not trying to forecast specific megaprojects. We're still keeping our forecasting to that traditional view of we have to be looking at the big picture, components of the economy when we do those forecasts. I hope that helps. I think so. That was a really good answer. Thank you so much, Michael. Kermit, I think we have time for one more. It's coming coming coming at you. You ready? I'm ready. one this one comes from Leroy from Oldcastle Building Supplies. Project planning has consistently increased. However, starts have decelerated in 2025 outside of manufacturing and data centers. Is there a scenario where we experience a significant number of planned projects move into the starts phase to catch up with market demand slash demographics? If so, what would be the catalyst? So, I, you know, I I I get this question. I I, you know, Natasha, I think more than any other, which is I'm getting, you know the question is I'm getting different signals from the different indicators that we use out there. How do I make sense of them? You know, project planning has been moving in a different direction than our ADI indicator, which is moving in a different direction than the construction starts, which is moving differently than the construction spending. And and and and how do I kinda integrate all those things to kinda figure out where the construction industry is is currently at, where where it's headed? Let let me and I think this situation has gotten gotten much worse over the last couple of years. Let me let me give you a a few reasons why some of these signals are diversifying and and diverging and, you know, what that means for the outlook. The the first thing to look at, I think, is the composition of projects that are being built. Michael Michael talked about about the growth of mega project. Well, mega projects are within a certain category. You know, you don't see them in sort of traditional commercial or institutional categories. They are more in the, you know, kind of manufacturing data centers and and things like that. And and I I was looking at that and, you know, a fully 40% of spending in the nonresidential construction market over the last three years has has come from the combination of three categories, manufacturing, warehouses, and data centers. And, yeah, when I talk to architects about how much work are they getting out of manufacturing facilities, data centers, and warehouses? The answer is very little, generally. So if you're not engaged in those markets, you're you're probably not seeing these growth. If you are in these, engaged in these markets, you're probably seeing that tremendous growth. Number two is, what what Michael talked about the, you know, project stress index that, you know, we're we're we're seeing, you know, in in recent years, it it it's more, moderated recently, but it's seen tremendous spikes in that recently. And so a project could show up, as a plot project planning and then it gets delayed, it it gets canceled, it it gets stalled. And, you know, for example, architects aren't gonna be billing for that work because it's not active anymore. So their numbers are gonna go down at the same time. Maybe the project planning numbers are are going up. And and and finally, not as important, but I think worth mentioning is is, you know, inflation in the market, increases in in in in labor cost and materials cost might spike a project planning indicator, might spike a a a construction starts indicator because they cost more, may not show up in our architecture billings index because they're not they're not billing anymore because they're building more expensive. It seems the design behind it that is really driving it, and that may or may not be affected by, by inflation there. So a long answer, I think, but but I think it does behoove folks to think a little bit about what each of these indicators are measuring and therefore what it tells them about, what segments they care about in the overall construction outlook. Thank you so much. Thank you, Kermit, Kristy, and Michael for all of your answers, and thank you to all of our attendees for asking such thoughtful questions. I'm gonna hand it over to Paul. Sure. Yeah. I think data center is like this the buzzword of the of the day, and I think it will remain a standout performer driven by the relentless demand for AI. It's really showing no signs of slowing for now. But looking ahead, I think the key question I'm interested in for for next year is whether we'll see a stabilization in borrowing costs and and greater clarity on the trade policy. So I think those two factors will likely determine, you know, whether we see a rebound in private sector activity or if this cautious approach continues. Well, I'm not gonna talk about data centers or mega projects. What I wanna talk about is, the watching cost. Right? We have seen in past periods where cost get ahead of us and bids are slow to respond, and that has a big impact on profitability. I think what if I were on the other side of this call, what I would wanna be, you know, hearing is, hey. You know, if you wanna protect your profitability, you have to be absolutely ruthless in terms of controlling costs, this year and certainly next year. You know, figuring out creative ways to manage the supply chains, to substitute products, to to control your cost so that you have any chance, to control your profit margin because we're already seeing pressures around that. It's it's showing up in the data everywhere that that firms have been sacrificing their profit margins to help keep prices stable, but that is only a temporary fix. So so for 2026, you know, be ruthless in cost control and, you know, make sure that you're bidding, correctly. I think that's gonna be the biggest challenge for next year for a lot of firms. Well, my final thoughts, Paul, are that the construction market is really unusually unbalanced at present. We're seeing a few strong sectors, but you know, most of the core sectors we think about are are really fairly weak. And and and and and the point I tried to make is that, you know, in that environment, there, I think, are more opportunities in, in in the reconstruction realm, particularly adaptive reuse, conversion of un unutilized facilities. I I I think the demand is there. And I think on top of that, as as I sort of suggested in my remarks, we're seeing more and more incentives to undertake these projects. More there's more, more motivation by state and local government to support these projects because they're really supporting the economic health of an area. And therefore, I think, that combination of strong demand and and and and growing incentives, I think, make that a a really key market to get into.