With the ups and downs of 2024 now firmly in the rearview mirror, experts have revealed critical trends set the shape the construction industry in the new year.
Whether you’re looking to expand your business, climb up the company ladder or just chase the biggest tradie bucks on the business, 2025 is gearing up to be a transformative year for everyone in the construction industry.
According to the folks over at market analysis company Altus Group critical trends like the living sector growth, evolving industry practices, ongoing tradie shortages and shifting construction costs taking centre stage.
But where can Australia’s construction leaders look to adapt your businesses to ensure growth in the year ahead? Let’s take a look.
Living sector boom
In 2025, the living sector is unsurprisingly expected to be a driving force behind the industry’s growth after last year saw Australia’s housing crunch come to head in news headlines across the country.
While the government is hard at work making good on the home-building promises, projects like Build-to-Rent (BTR), social housing, student accommodation, and aged care facilities are also forging the way forward as the most common building project planned for the foreseeable future.
According to Niall McSweeney, Altus Group’s Head of Development Advisory in Asia-Pacific, “Anything living, anything that you put your head down on at night, is going to be the area where it’ll all be happening, especially as the government chases its 1.2 million new dwellings target.”
Government incentives and private sector engagement are propelling this sector forward. For instance, BTR is benefiting from taxation adjustments, while social housing programs are increasingly supported by public-private partnerships. However, challenges do remain.
“Migration is outpacing housing development,” McSweeney highlighted, emphasizing the urgent need to align housing supply with demand.
Initiatives like the “pattern design book” for residential projects aim to expedite approval processes through pre-approved designs, streamlining development timelines. Yet, greater synergy between cost-effectiveness and policy objectives will be essential to maximize impact.
Infrastructure slowdown
While Australia’s infrastructure pipeline still has some gas left in the tank, it is showing signs of deceleration beyond projects already in progress.
Global economic uncertainties, including shifts in Southeast Asia, Europe, and the United States, as well as China’s economic instability, are influencing private investment in the long term, as many hedge their bets to see which way the wind will blow.
“There’s still a monster pipeline of work that is in delivery, but beyond that, the forward outlook is starting to slow,” McSweeney observes.
The one clear trend industrial trend is developers pivoting toward high-demand sectors like data centres. However, this pivot introduces challenges such as energy consumption and availability.
“As much as it’s about the location for data centers, it’s also about power,” McSweeney notes.
Embracing sustainability goals
Following on from 2024’s sustainable additions to construction codes, it’s clear reducing the industry’s environment will remain central to the construction narrative in 2025.
But, according to McSweeney, it’s slow going teaching an old dog new tricks. Despite inroads being made in operational efficiency, the industry is reportedly grappling with the complexities of whole-of-life carbon assessments.
Mandates for embodied carbon measurement are increasing, yet practical implementation remains a challenge.
“To truly see shifts in the sustainability sector, standardization and technological innovation are needed,” says McSweeney.
Advanced construction technologies such as prefabrication and digital twins could prove to be an answer in helping streamline processes and reduce waste, but it remains to be seen how regulatory frameworks will be changed to accommodate a new way of building.
Tackling talent shortages and construction costs
Persistent challenges like construction costs and tradie shortages seem to be sticking around heading into the new year, following several reports in 2024 of massive staffing issues sweeping across the country’s work sites.
Trades like plumbing, electrical work, and carpentry were the most in high demand, but Atlus warned a gap in talent quality would continue to exacerbate the issue moving forward.
“Rather than a labour shortage, there is a talent shortage,” McSweeney points out, underlining the need for targeted training and retention initiatives to bridge the gap.
However, the outlook on construction costs was a bit brighter. Despite volatility spikes forecast around growing geopolitical tensions, material prices are expected to continue stabilising in 2025 thanks to reduced government demand helping moderate cost growth.
“With costs still high but escalation easing, the industry has a chance to lead globally,” McSweeney asserts.
In hopes of helping the industry manage costs effectively, Atlus encouraged construction businesses to begin adopting lean construction practices and focusing on efficiency, particularly in sectors like BTR and student housing.
The road ahead
With 2024 finally making headway on a lot of the same constraints hitting businesses since COVID and rate cuts forecast on the horizon, it’s clear the sector is entering the new year with a mix of optimism and caution.
Above all else, Atlus pointed toward top-end strategic planning, workforce development, and sustainability as crucial factors for navigating the choppy industry waters heading into the new year.
But with Australia’s construction landscape poised for transformation, McSweeney said there were abundant opportunities for those ready to innovate and adapt to the higher interest rate environment.
“The era of near-zero interest rates is over,” McSweeney warned.
“Leaders can invest in workforce development, innovation, and sustainability to help future-proof the sector.”