Construction Industry Trends in Winter 2025 and 2026

The construction industry continues to struggle with a significant shortage of skilled workers across various trades. This scarcity drives up labor costs and can considerably delay project timelines.

Our whitepaper Navigating a Tight Labor Market in Construction highlights the importance of prioritizing strategies for building and sustaining a talent pipeline that's essential for business owners to ensure their firm's survival and success. Some of these strategies include:

• Shifting from talent retention to talent attraction
• Connecting with the new generation
• Embracing technology and innovation
• Investing time and resources in succession planning

Rising costs and supply chain volatility continue to pose significant challenges for the construction industry. Material costs remain elevated, with year-over-year increases often ranging between 3% and 6%, particularly for essential materials such as steel, lumber, concrete and switchgear.¹ Ongoing supply chain disruptions compound the persistent cost inflation, resulting in unpredictable lead times and sourcing difficulties for specialized or imported components and materials. Additionally, external factors such as trade policy uncertainties and fluctuating shipping costs further complicate pricing strategies and procurement planning.

These challenges underscore the importance of proactive supply chain management, including diversifying suppliers, leveraging technology for better forecasting and exploring alternative materials to mitigate risks. Collaboration with insurance and risk management partners can also help construction firms navigate these uncertainties by developing tailored strategies to address cost volatility and supply chain disruptions effectively.

Our whitepaper Navigating Supply Chain Challenges in 2025 goes over several strategies for tackling supply chain disruptions, including:

• Diversifying sourcing and material alternatives
• Contractual protections and risk management
• Supply chain management and technological solutions
• Addressing existing supply chain disruptions

The trend toward larger, more complex construction projects continued throughout 2025. These projects demand advanced technologies, innovative building approaches and sophisticated project management expertise to ensure efficient and successful completion. The increasing complexity necessitates better integration of building information modeling (BIM), data analytics and collaborative technologies to manage project timelines, resource allocation and safety.

Gallagher specializes in managing and placing large, complex projects of all sizes and types. Additionally, we provide in-house wrap-up administration for projects covered under a controlled insurance program.

The demand for data centers has been experiencing explosive growth in 2025, driven by factors like the increasing adoption of artificial intelligence (AI) and the explosion of data generation. This explosion translates into a surge in data center construction projects but also presents challenges related to securing land, power availability and skilled labor to meet the escalating demand.

Gallagher has extensive expertise with risk management solutions for contractors pursuing data center projects, including robust insurance policies — such as professional indemnity, builder's risk and cyber risk — thorough contractual reviews to define liability and payment terms, and proactive planning for supply chain disruptions for long-lead equipment. Other approaches involve establishing comprehensive safety protocols, ensuring multiple power sources and addressing potential delays from permitting and compliance issues.

Subcontractors face increasing challenges in the current construction landscape, including rising material costs due to inflation, ongoing supply chain disruptions and intensifying competition. Inflationary pressures are expected to persist, impacting project budgets and necessitating careful planning and cost management strategies. While supply chain issues may have seen some improvement from recent years, they continue to impact material availability and project timelines.

The claims handling landscape within the construction industry is becoming increasingly complex. One noticeable construction industry trend is the rise of nuclear verdicts in civil litigation — particularly in personal injury liability cases — driven in part by litigation funding practices.

These large verdicts impact construction firms' financial stability and their ability to complete projects, leading to higher insurance premiums and potential disruptions. See our article Litigation Funding in the Construction Industry to learn more.

Maintaining continuity is a significant challenge for construction companies, particularly those facing owner retirements or seeking to expand through acquisition or private equity involvement. Employee Stock Ownership Plans (ESOPs) and limited liability corporations (LLCs) are gaining popularity as mechanisms to facilitate business transitions, offering a path for owners to exit while ensuring the longevity of the company. ESOPs, in particular, provide tax advantages and foster an ownership culture among employees.

We have a network of trusted CPA firms specializing in continuity planning. Reach out to a Gallagher representative for more information.

While the construction industry may have lagged in AI adoption, it's rapidly catching up. AI is poised to revolutionize various aspects of construction, from enhancing safety and tracking progress to optimizing project planning and design. AI tools are being implemented to improve efficiency, reduce errors, streamline workflows and facilitate data-driven decision-making.

Challenges related to data quality, integration with legacy systems and the need for skilled talent remain, but the industry is actively embracing AI to address its pressing needs.

Given the evolving risk landscape, firms are increasingly exploring alternative risk transfer options, with single-parent, single-cell and group captives gaining significant traction. These innovative solutions allow companies to retain more risk, potentially reduce costs and gain greater control over their insurance programs. Captives also offer the flexibility and customization needed to address specific risks while supporting broader non-financial objectives, such as sustainability.

This trend is particularly evident in construction industry, where captives are rapidly becoming the preferred alternative risk solution. In today's buyer's market, well-run construction companies with strong safety programs are turning to captives over traditional insurance because of their tailored, cost-effective approach that aligns with operational excellence.

At Gallagher, we partner with all the leading captive providers to ensure our clients find the perfect fit for their unique needs. Whether you're exploring captives for the first time or considering a switch, we deliver customized solutions from every major provider. Even traditional construction carriers are creating captives to keep up with this shift, but with our expertise, you can stay ahead of the curve.