September 29, 2025

New Jersey Construction Industry Set for Growth

News Summary

The construction industry in New Jersey is projected to experience significant growth, with spending expected to rise by 17%. This forecast follows a recent decision by the Federal Reserve to lower interest rates, promoting new project initiation. Despite challenges such as rising costs and a shortage of young workers, the overall economic outlook indicates a resilient construction sector, with expectations of $140 billion in project pipelines over the next five years.

Long Branch, New Jersey – The construction industry in New Jersey is set for significant growth, with spending predicted to rise by 17% above 2024 levels, according to a recent forecast presented at the Fall 2025 Convention of the Associated Construction Contractors of New Jersey (ACCNJ). The event, held at the Ocean Place Resort & Spa, garnered over 200 attendees, including construction leaders and industry stakeholders.

Jeffrey Otteau, Managing Partner and Chief Economist from the Otteau Group, highlighted that aggregate construction spending is expected to exceed $16 billion in New Jersey in 2025. This positive outlook comes despite a national construction spending decline of 3%, as New Jersey’s financial landscape appears resilient.

The forecast follows a recent decision by the Federal Reserve to reduce interest rates by a quarter percentage point, a move anticipated to stimulate construction activity and encourage new project initiation. As interest rates decrease, they generally lead to economic growth and increased construction activity, providing a boost to the local economy.

Impact of Rising Costs and Inflation

Throughout the past few years, construction costs have surged significantly, with increases of 34% in North Jersey and 32% in South Jersey since the pandemic began. Such hikes have posed challenges for project feasibility; however, recent reports indicate that inflation rates are gradually easing, now recorded at 2.9%. This reduction could signal a more favorable environment for new construction projects.

Another factor contributing to this potential growth is a marked decline in the average price of Brent crude oil, which dropped from $82 per barrel in 2023 to $68 in 2025. Lower oil prices tend to correlate with decreasing construction costs and overall inflation, further improving economic conditions for the construction sector.

Sector-Specific Updates

The civil construction sector has shown remarkable potential, with an impressive 145% increase in project starts and an accompanying 88% growth in spending this year. Recorded spending in this sector rose from $1.40 billion in 2023 to $2.34 billion in 2025.

Conversely, the industrial construction sector experienced a notable 73% drop in project starts, a correction following an earlier period of rapid expansion. Multifamily housing has garnered attention as well, with an increase in spending by 8% and project starts up by 20%, highlighting a robust market for apartment developments.

Future Projections and Labor Concerns

Looking ahead, the pipeline for construction projects in New Jersey is estimated to be around $140 billion over the next five years. Despite this optimistic forecast, challenges remain, particularly regarding labor supply. The construction industry has voiced concerns over a shortage of young workers entering the field, compounding existing labor shortages and inflationary pressures.

Increased demand in the construction sector is expected to generate additional value, repair, and improvement programs as commercial property values begin to rebound. The overall performance of the construction industry is critical, given its significant direct, indirect, and induced economic impacts on local economies, including job creation and enhanced tax revenue.

Conclusion

While New Jersey’s construction sector anticipates growth and activity in the upcoming years, it must navigate several ongoing challenges, including labor shortages and rising costs due to tariffs. Nevertheless, the optimistic outlook for spending and project initiation suggests a resilient industry poised for recovery and advancement.

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