The construction industry continues to navigate a complex landscape in Q2 2025. While private residential development remains uneven, we’re seeing strength in public infrastructure and utility-related work. Medium-density housing, dubbed the “missing middle,” is making a notable comeback, while government-funded civil projects offer stability amid broader uncertainty. In Texas and other Sun Belt markets, strong population growth continues to fuel both utility expansion and road projects, driving buyer interest toward firms with infrastructure contracts or utility specialization.
Key Trends
Resurgence in “Missing Middle” Housing The National Association of Home Builders reports that construction starts for 2–4 unit residential buildings reached 23,000 over the past four quarters, a 53% increase compared to the previous period. These townhomes, duplexes, and small multifamily units are in demand due to affordability concerns and urban infill needs. However, limited zoning reform could constrain long-term momentum in this segment.
Federal Infrastructure Spending Boosts Heavy Construction Highway, street, and bridge construction firms are benefiting from ongoing funding through the Infrastructure Investment and Jobs Act. Backlogs are healthy, especially for firms tied to state DOTs and municipal projects. However, a 10% rise in diesel fuel costs and ongoing labor shortages are eroding margins. Buyers continue to target firms with bonded work and proven compliance with public project bidding standards.
Utility System Construction Sees Stable Demand Despite a slight softening in commercial new construction, utility contractors remain in demand for water, sewer, and telecom infrastructure. Rising demand in suburban Texas and regional growth corridors is keeping the pipeline full. Interest rates are still a headwind, but well-capitalized buyers see long-term value in companies positioned for population-driven utility upgrades.
Outlook for the Second Half of 2025
The outlook is moderately positive, especially for firms aligned with public infrastructure, utility upgrades, or residential infill. We expect buyer activity to remain strong for companies with recurring revenue from service or maintenance contracts, scalable crews, or specialty licensing. Sellers with proper financial records and backlog visibility are attracting premium valuations, especially in growing Texas metros.
Thinking of selling your construction business in the next 1–3 years? Take our no-cost Sellability Score Assessment Today to understand your company’s marketability and exit readiness.
Lion Business Advisors’ quarterly industry insights incorporate data and trends sourced from internal deal flow and buyer activity, Vertical IQ, and market comparables from platforms such as Axial and BVR (Business Valuation Resources).
Industry Insight Report: Construction Q2-2025
The construction industry continues to navigate a complex landscape in Q2 2025. While private residential development remains uneven, we’re seeing strength in public infrastructure and utility-related work. Medium-density housing, dubbed the “missing middle,” is making a notable comeback, while government-funded civil projects offer stability amid broader uncertainty. In Texas and other Sun Belt markets, strong population growth continues to fuel both utility expansion and road projects, driving buyer interest toward firms with infrastructure contracts or utility specialization.
Key Trends
Resurgence in “Missing Middle” Housing
The National Association of Home Builders reports that construction starts for 2–4 unit residential buildings reached 23,000 over the past four quarters, a 53% increase compared to the previous period. These townhomes, duplexes, and small multifamily units are in demand due to affordability concerns and urban infill needs. However, limited zoning reform could constrain long-term momentum in this segment.
Federal Infrastructure Spending Boosts Heavy Construction
Highway, street, and bridge construction firms are benefiting from ongoing funding through the Infrastructure Investment and Jobs Act. Backlogs are healthy, especially for firms tied to state DOTs and municipal projects. However, a 10% rise in diesel fuel costs and ongoing labor shortages are eroding margins. Buyers continue to target firms with bonded work and proven compliance with public project bidding standards.
Utility System Construction Sees Stable Demand
Despite a slight softening in commercial new construction, utility contractors remain in demand for water, sewer, and telecom infrastructure. Rising demand in suburban Texas and regional growth corridors is keeping the pipeline full. Interest rates are still a headwind, but well-capitalized buyers see long-term value in companies positioned for population-driven utility upgrades.
Outlook for the Second Half of 2025
The outlook is moderately positive, especially for firms aligned with public infrastructure, utility upgrades, or residential infill. We expect buyer activity to remain strong for companies with recurring revenue from service or maintenance contracts, scalable crews, or specialty licensing. Sellers with proper financial records and backlog visibility are attracting premium valuations, especially in growing Texas metros.
Thinking of selling your construction business in the next 1–3 years?
Take our no-cost Sellability Score Assessment Today to understand your company’s marketability and exit readiness.
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