Electrical Contractors NAICS 238210

May 9, 2025 - Power Project Spending to See Steady Growth Through 2029

• North American construction and engineering spending in the power sector in 2025 is expected to grow by 6% and notch robust annual growth through 2029, according to FMI’s second-quarter 2025 North American Engineering and Construction Outlook. While the Trump administration is emphasizing natural gas and oil production, the ongoing electrification of transportation and manufacturing, as well as voracious demand from data centers, will increase demand from all electricity sources except coal. To power their data centers, technology firms are making investments in clean energy microgrids, nuclear energy, and battery storage systems. According to the 2024 US American Society of Civil Engineers’ infrastructure Report Card, 20% - or about $2 trillion – of the US’s total infrastructure needs through 2023 are related to energy. FMI forecasts that energy construction and engineering spending will rise 5% in 2026, 3% in 2027, 4% in 2028, and 6% in 2029.
• US home builders are dangling more incentives to close deals amid a tepid spring home-buying season that is halfway over, according to The Wall Street Journal. Builders typically notch 40% of their annual sales during the spring, but mortgage rates that are stuck around 7% and a lack of affordability have reduced demand. Builders have increased incentives to bring buyers off the sidelines, including mortgage-rate buydowns, design upgrades, and price cuts. In the first two weeks of April, incentives offered by builders equaled 7.2% of the purchase price, up from 6.1% in January, according to data from John Burns Research & Consulting. Incentives are eating into builder profits during a season that usually sees few discounts, and prices tend to rise. Soft demand for new homes is expected to worsen as the effects of tariffs take hold, potentially adding between $5,000 and $15,000 to the cost of a new home.

• Demand for building design services declined in March compared to February, according to an April report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) fell to 41.1 in March compared to February’s reading of 45.5. Any reading of 50 or more indicates growth in architectural billings. The score for new project inquiries fell to 47.7 in March compared to 47.8 in February, but the index for the value of new design contracts increased from 42 to 42.4. The AIA’s Chief Economist, Kermit Baker said, “Clients are increasingly cautious about starting projects due to uncertainty over future trends in interest rates and building materials costs, as well as the potential for an economic slowdown. Unfortunately, this softness in firm billings is likely to continue as indicators of future work remain weak, however, the average project backlog at firms stands at a reasonably healthy 6.5 months, offering a bit of a buffer if future project work continues to remain soft.”
• The total value of construction put in place decreased 0.5% in March compared to February, according to the US Census Bureau. Spending on nonresidential projects fell 0.5%, and residential spending declined by 0.4%. Within the nonresidential segment, 11 of 18 construction subcategories saw spending decline, including healthcare (down 1.8%), lodging (-1.3%), office (-1.2%), commercial (-1%), and educational (-0.8%). Spending was also weaker for power, highway and street, sewage and waste disposal, manufacturing, and communication. Pockets of nonresidential building spending growth included transportation (up 1.2%), public safety (+0.7%), and amusement and recreation (+0.1%). Associated Builders and Contractors Chief Economist Anirban Basu said, “Data center investments, which accounted for more than 70% of the increase in private nonresidential construction spending between March 2024 and March 2025, are perhaps the only remaining source of industry momentum. Manufacturing construction, while still elevated, has wavered in recent months. Most commercial segments remain subdued under the weight of high borrowing costs and tight lending standards. Residential construction continues to slide.”