Economic forces reshape the construction industry in 2025

As the construction industry in Portland and across the Pacific Northwest enters the latter half of 2025, its key players are navigating a period of economic adjustment. Inflationary pressures, higher interest rates, a labor shortage and evolving trade dynamics are all influencing how projects are financed, staffed and delivered.

Recent months have brought price increases for construction materials. Local contractors are seeing cost volatility in key inputs like lumber, steel, aluminum and cement. With developers increasingly cautious about budget overruns, there is a greater emphasis on tighter procurement planning and value engineering to maintain project margins. In response, contractors are working closely with suppliers, reevaluating procurement strategies and pursuing more flexible project terms to keep jobs moving forward.

Higher borrowing costs continue to shape project feasibility, particularly in Portland’s multifamily and mixed-use markets. Developers are adjusting by refining scope, extending timelines or seeking alternative capital sources. However, there is cautious optimism among some industry professionals that interest rates may stabilize or decline later in the year, potentially unlocking new activity in the second half of 2025.

Labor availability continues to remain a top consideration for project planning. Potential immigration crackdowns pose a serious threat to an already undermanned workforce. We are seeing construction companies respond by expanding recruitment outreach, investing in apprenticeship programs and adopting technologies that can offset manual labor needs. These efforts are gradually helping to build a more sustainable workforce pipeline for the future.

Trade dynamics also continue to evolve, with new tariffs and policy shifts prompting the need to revisit sourcing decisions. While this has introduced complexity, it has also encouraged innovation. Some Portland-area construction companies are exploring local and regional suppliers to reduce reliance on volatile markets and better manage costs.

These adaptive strategies are helping maintain project momentum even in a dynamic environment. Public-sector construction looks to be a steady contributor to regional activity. Federal infrastructure investments are supporting projects across Oregon, including major improvements to highways, bridges, transit and broadband. These initiatives not only create construction opportunities but also contribute to long-term economic resilience and community development.

While the current environment presents challenges, it also highlights the adaptability and problem-solving capacity of the construction industry. Across Portland and the Pacific Northwest, contractors are leveraging lessons from the past several years to navigate uncertainty with more precision and confidence.

In the months ahead, the construction industry players that continue to invest in relationships, innovation and workforce development will be well-positioned to take advantage of new opportunities as conditions evolve. For Portland’s construction community, this moment offers a chance not only to weather change — but to emerge stronger.

Matthew Wright is a Shareholder with Geffen Mesher, a Portland-based accounting firm. With over 20 years of experience, he is a key leader in the firm’s audit department and primarily serves clients in the construction and manufacturing industries.