The construction industry entered Q3 2025 amid continued economic volatility, immigration enforcement disruptions, and high material costs, but also signs of resilience. According to Vertical IQ, more than one-third of construction firms reported labor impacts from ICE enforcement actions, contributing to one of the most significant workforce shortages in years. Despite headwinds, acquisition interest remains strong for contractors with reliable crews, infrastructure exposure, or recurring service contracts.
Key Trends
Demand for medium-density residential construction is on the rise, driven by affordability challenges and evolving lifestyle preferences. The so-called “missing middle”, duplexes, townhomes, and small multifamily projects, is gaining traction in urban and suburban infill zones, especially where local zoning permits increased density. Meanwhile, developers continue repurposing underperforming commercial spaces like shopping malls into residential communities, reflecting a broader rebalancing of real estate demand. For sellers, this trend may increase interest in firms capable of adaptive reuse, mixed-use development, or navigating local permitting complexities.
Employment and Wage Trends
Employment in new multifamily housing construction fell 3.2% year-over-year in July 2025, despite a decade-long growth rate of 46%, more than triple the 13% increase across all private employment, according to the Bureau of Labor Statistics. Labor shortages have been exacerbated by ICE enforcement, which disrupted operations for nearly one-third of construction companies. At the same time, wages continue to climb. Average hourly pay for nonsupervisory employees at residential building construction firms rose to $35.17 in July, an 8.3% year-over-year increase, and 60.7% growth over the past decade. This upward pressure on wages may compress margins but also reflects persistent demand for skilled labor.
Industry Forecast
Vertical IQ projects a compound annual growth rate (CAGR) of 5.07% for the US construction sector from 2025 to 2029. That figure outpaces the expected growth of the overall economy, signaling a continued appetite for both public infrastructure investment and private development. Texas, in particular, continues to benefit from population inflows, which support demand for housing, utilities, and transportation projects.
M&A Market Outlook
The construction M&A market remains active, with a balanced environment between buyers and sellers. Private equity groups, strategic acquirers, and individual operators are pursuing deals in specialty trades, infrastructure support services, and recurring-revenue models. Companies with clear backlog visibility, strong safety records, and a documented workforce are commanding higher multiples. Sellers with EBITDA north of $1 million and transferable management teams are especially attractive as lenders navigate tighter underwriting conditions.
We expect selective deal activity to continue into early 2026, with labor-constrained businesses still in demand. For owners considering a sale in the next 1–3 years, now is the time to evaluate where you stand and begin planning.
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 Q3-2025
The construction industry entered Q3 2025 amid continued economic volatility, immigration enforcement disruptions, and high material costs, but also signs of resilience. According to Vertical IQ, more than one-third of construction firms reported labor impacts from ICE enforcement actions, contributing to one of the most significant workforce shortages in years. Despite headwinds, acquisition interest remains strong for contractors with reliable crews, infrastructure exposure, or recurring service contracts.
Key Trends
Demand for medium-density residential construction is on the rise, driven by affordability challenges and evolving lifestyle preferences. The so-called “missing middle”, duplexes, townhomes, and small multifamily projects, is gaining traction in urban and suburban infill zones, especially where local zoning permits increased density. Meanwhile, developers continue repurposing underperforming commercial spaces like shopping malls into residential communities, reflecting a broader rebalancing of real estate demand. For sellers, this trend may increase interest in firms capable of adaptive reuse, mixed-use development, or navigating local permitting complexities.
Employment and Wage Trends
Employment in new multifamily housing construction fell 3.2% year-over-year in July 2025, despite a decade-long growth rate of 46%, more than triple the 13% increase across all private employment, according to the Bureau of Labor Statistics. Labor shortages have been exacerbated by ICE enforcement, which disrupted operations for nearly one-third of construction companies. At the same time, wages continue to climb. Average hourly pay for nonsupervisory employees at residential building construction firms rose to $35.17 in July, an 8.3% year-over-year increase, and 60.7% growth over the past decade. This upward pressure on wages may compress margins but also reflects persistent demand for skilled labor.
Industry Forecast
Vertical IQ projects a compound annual growth rate (CAGR) of 5.07% for the US construction sector from 2025 to 2029. That figure outpaces the expected growth of the overall economy, signaling a continued appetite for both public infrastructure investment and private development. Texas, in particular, continues to benefit from population inflows, which support demand for housing, utilities, and transportation projects.
M&A Market Outlook
The construction M&A market remains active, with a balanced environment between buyers and sellers. Private equity groups, strategic acquirers, and individual operators are pursuing deals in specialty trades, infrastructure support services, and recurring-revenue models. Companies with clear backlog visibility, strong safety records, and a documented workforce are commanding higher multiples. Sellers with EBITDA north of $1 million and transferable management teams are especially attractive as lenders navigate tighter underwriting conditions.
We expect selective deal activity to continue into early 2026, with labor-constrained businesses still in demand. For owners considering a sale in the next 1–3 years, now is the time to evaluate where you stand and begin planning.
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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