As the construction industry prepares for 2025, leaders face a complex landscape of labor shortages, supply chain pressures, and shifting policies. Jeff Peragallo, director and vice president of operations at Linesight, offers insights into how proactive planning and strategic investments can help contractors thrive amid these challenges.

Prepare Now to Thrive: Strategic Insights for Construction Leaders

The Impact of Labor Shortages on High-Tech Projects

The construction sector is witnessing unprecedented challenges, particularly in regions with high-tech and mission-critical projects like data centers. Skilled labor shortages have become a significant hurdle, especially in the MEP trades. According to Jeff Peragallo from Linesight, this issue is not just a regional concern but a global one, affecting project timelines and costs. The demand for AI computing and data center expansion has exacerbated the situation, putting immense pressure on the supply chain.In 2024, the industry faced numerous obstacles, including fluctuating metal costs and procurement challenges. Despite some stabilization in commodity prices, the cost of metals remains volatile. Copper and aluminum prices, for instance, are higher than in 2023 due to supply issues and import costs. This volatility underscores the need for strategic planning and investment to mitigate risks in 2025. Contractors must adopt innovative approaches to address these challenges and ensure project success.

Strategies to Mitigate Labor Shortages

Labor shortages continue to be a pressing issue in the construction industry. To tackle this problem, several strategies are being considered for 2025. Conducting a labor survey before initiating large-scale projects can provide valuable insights into local supply and demand dynamics. This information helps determine whether expanding the geographic reach of the labor pool is necessary or if alternative measures should be taken to secure adequate labor.Offsite fabrication is another promising strategy. By reducing onsite labor requirements, offsite fabrication can significantly enhance efficiency and alleviate labor constraints. Creating an appealing work environment is equally important. Providing onsite amenities, fostering a positive jobsite culture, and offering unique perks can attract and retain skilled workers. Building strong partnerships with vendors and focusing on repeat business can also create consistent and reliable resources, moving away from the competitive bidding cycle that often disrupts project continuity.

Procurement Strategies to Navigate Supply Chain Risks

Effective procurement and pricing strategies are crucial for mitigating risks in 2025. Early engagement with vendors and accurate demand forecasting are essential steps. Collaborating with vendors early in the project lifecycle ensures better access to production slots and allows contractors to lock in pricing before potential increases. Expanding the supplier base reduces reliance on single sources, thereby managing risks associated with supply chain disruptions or geopolitical challenges.Monitoring commodity trends, such as fluctuating material costs, enables contractors to make informed decisions about purchasing. Leveraging price drops strategically can reduce costs, while recognizing that price changes due to tariffs are excluded from proposals. Prioritizing components with procurement challenges, such as transformers and cooling systems, is vital to avoid delays. These strategies will be key to navigating the complexities of the supply chain in 2025.

The Evolution of Data Center Demand and Supply Chains

AI-driven data center demand has placed significant pressure on supply chains, particularly for power and cooling solutions. In 2024, long lead times for critical equipment were a persistent challenge. Generators over 3,000 kW faced lead times of up to 130 weeks globally, while medium voltage transformers averaged 43 to 47 weeks. The constrained supplier capacity impacted project timelines, highlighting the need for strategic foresight.Relief is expected in 2025, with opportunities to expand production capacities from key suppliers. This should begin to stabilize lead times in the second half of the year. Cooling solutions and power distribution systems will remain areas of focus, with ongoing innovation to meet growing demands. However, high demand for advanced equipment and potential external disruptions, including geopolitical risks, will continue to pose challenges. Firms must strengthen demand forecasting, secure production slots early, and diversify supplier bases to navigate these complexities successfully.