Where the Money’s Going: Top Construction Growth Sectors for 2025

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ℹ ABOUT THIS EPISODE

Data centers, manufacturing reshoring, energy projects, infrastructure builds—2025 could be a boom year for contractors, but only if you position your business to catch the wave. In this episode of Contractor Success Forum, Wade Carpenter and Stephen Brown break down exactly where construction dollars are flowing and how your company can win the most profitable work of the next decade.

From federal contracts to high-margin data center jobs, this episode shows you how to pivot smartly and scale wisely—without overextending your business.

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⌚️ In this episode:

• 00:30 Impact of the One Big Beautiful Bill Act
• 01:41 Economic Trends and Market Sentiments
• 02:36 Military and Infrastructure Spending
• 04:23 Geographic Market Trends and Opportunities
• 07:12 Federal Contracts and Small Business Participation
• 14:29 Strategic Growth and Workforce Considerations

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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com

Transcript

[00:00:00] 

Wade Carpenter: Data centers are booming. Manufacturing is reshoring. Energy and infrastructure projects are creating some of the best opportunity we've seen for construction in years. Welcome to the Contractor Success Forum. I'm Wade Carpenter with Carpenter & Company CPAs, here with my co-host Stephen Brown with McDaniel Whitley Bonding and Insurance. And today we're talking about the possibility of massive growth sectors transforming construction right now, and how you can position your business to capture the most profitable work of the next decade.

Stephen, the One Big Beautiful Bill Act is reshaping construction markets in ways we've never seen before. So are we talking about boom time in construction?

Stephen Brown: It's interesting, you hear so many different things. What is the media telling you? What's going on in your part of the world? What's coming up in the future? I think most of the information on the One Big Beautiful Bill that you see is negative in some way, but there's just a lot of good things in there that if you [00:01:00] understand the bill is passed, the money's gonna be spent, how much money is going in to military infrastructure.

Also what about the economic trends of the future? Trends to make the United States economy stronger able to produce more in-house, and also the future of our energy needs, especially super computing. All this is part of the One Big Beautiful Bill.

I don't think people really understand that, Wade.

Wade Carpenter: I don't think they do either. And it is not just the tax act that was signed into law July 4th. I know you just came back from Fed Con and the sentiment from AGC as I understood it was, it's gonna be a good market already.

Today we want to talk about some of the things that will be shaping this as well as some of the stuff that we'll get into AI and how that's data centers that you've just experienced in the supercomputers, we're seeing a change in the focus on where money is being put with energy and pipelines and it's no longer [00:02:00] taboo to talk about oil pipelines and stuff like that.

But there's a lot of spending and what I think a lot of people in the legacy media was talking about, okay, we got these tariffs and it's gonna cause inflation and all the construction and it didn't do that. There's been a $27 billion surplus in the federal budget for June.

And now we're seeing some of this stuff that's gonna roll out with the tax bill. I think what we're gonna see is several sectors possibly really taking some big jumps as well as some of the federal spending. I know we recently did one on the federal spending. But anyway, what is your thoughts? I mean this is where I see things going.

Stephen Brown: There's certain things in construction that you can count on like the sun coming up in the morning, and that is military spending. Everybody needs water to survive. Everybody needs to have a roof over their head to be dry, to be protected from the elements. Wastewater has to be treated. It can't just be dumped, out there into our environment and expect us [00:03:00] not to get sick from it. The infrastructure just doesn't stop. From an economic standpoint, you have to say, okay, is the money there to pay for it? Who's paying for it? And how old are the systems that we're needing to replace? And that's what kind of drives what construction niche that you're going take advantage of.

Wade Carpenter: Yeah, I think there's a lot of market factors out there right now. T he sentiment I think is changing. The fears over tariff. There's also a lot of pressure on the current fed chair to lower interest rates. I believe that, based on where we are in the other countries, I think it makes a lot of sense lower those interest rates.

So what's that gonna do? You lower interest rates, that's also gonna spur some more residential housing markets, a lot of these things. \

Today I wanted to go through some of the talking points where these sectors are. The sentiment, I think like the engineering news record or whatever. They have a confidence input index. I know it dropped a little bit in the second quarter, partly because of the tariffs. [00:04:00] But we're seeing some of these big year over year increases that I see coming down the pike here.

Anyway I believe you've got this forest after the storm. And you got some trees down, some places that got hit. But now new growth is sprouting. Now that they're getting out from under the shade, the new growth is taking off and taking off fast. That's what I see.

Stephen Brown: I see that too. And, you know, you're in a bigger marketplace in Atlanta than I am in Memphis right now. As a general rule, we always look to see what's going on in California, Texas, Florida, New York, some of the bigger market trends that are going on. Because eventually that trickles into our operating area. It's important, I think, geographically to think where you're located and what's going on. in your particular location of needs. When you think about the infrastructure that it takes to support a city of 30 million people versus a city of a million people, it's 30 times [00:05:00] bigger. It's 30 times more complex. You may have 30 times the competition doing the work. I don't know. But where there's a need, I believe the economy has just gotten smaller. More people are opening up. In the old days, you stuck to write your hometown and just what you knew how to do. Well, that's great. You may not want to travel, you may not want to get involved with it, but I see a lot of successful contractors finding people that really do like to travel. Especially in the construction industry, when you're, younger, being able to travel and get the work done and you can make higher profit margins from it. It's probably taken us off the subject matter, but.

Wade Carpenter: Not at all. I know you talk about different markets with Memphis versus Atlanta, but Memphis, you just saw that big AI Center, I guess, Elon Musk, with X, AI or whatever built that. We've got a new project that is starting to be built here in Georgia. Georgia Tech is building out, Meta just announced a new, huge they're building out a center [00:06:00] and these places are taking, you know, new building, as well as they're gonna need a lot more energy.

So there's a lot more energy projects out there. As we build these manufacturing, we've already talked about in previous episodes, the first part of the year with the reshoring, where, if you don't wanna pay the tariff, bring the manufacturing here.

So we've seen them boom already and people spinning up new manufacturing facilities already here. Several of these niches are really starting to take off. And again, the infrastructure, like you were saying, has to follow.

Stephen Brown: Absolutely. And you mentioned earlier, E&R Magazine's economic index. The same thing you can use their data from is, who are the big general contractors doing the huge projects and what type of projects? So I would say if you wanted to get in that type of niche, they're always looking for subcontractors. It's a good way to learn how to do that business. When you take something as big as, the XI cooling project here in Memphis, you [00:07:00] go to a construction provider that has a track record of turning over complex jobs fast because time is money.

Wade Carpenter: Yeah, and we also already talked about that federal spending. As far as the One Big Beautiful Bill Act that was signed in law, $150 billion in defense allocation, so things like shipyard and defense, you may feel like you're not qualified or you don't do federal contracts, but as we said a few weeks ago, maybe this is a time to start going to sam.gov and getting signed up.

And you may think you're too small for this stuff, but there's a call for the big guys to partner with the smaller guys. You probably know better than I do about how small company participation has to be put in place in some of the federal contracts. You wanna talk about that for a minute?

Stephen Brown: Sure. You know, the mentor protege agreements in federal contracting are everywhere. They start off small. They've gotten a lot bigger. Because, the government is mandating X amount [00:08:00] of their spending dollars go to what's classified as a small business. And a small business in contracting may sound small to a company doing a billion dollars a year in sales, but for a company doing 50, $60 million a year in sales, that's still small business in the government's viewpoint. And so they're targeting this business to be set aside for them, and still some of these projects may be so much bigger than that small business can do on their own. So they're encouraging you to use a mentor to help you grow into a larger sector of business.

Wade Carpenter: We've always said, joint ventures are a great way for a smaller contractor to get into some more, larger jobs and expand. Some of the things that The One Big Beautiful Bill Act, I wish they had a different name. O-B-B-B-A, whatever we want to call it. There's some things in there that they put that made some of the expensing elections permanent that if you need the equipment, it will help spur some of that.

Building out these manufacturing facilities, there's some [00:09:00] credits for manufacturers to build and expense upfront the building of these things. I couldn't believe some of that Because normally the expensing elections don't have to do with real estate. And if it qualifies that absolutely does qualify for it. Not all real estate can be expensed upfront, but that's another thing that's going to continue to spur this manufacturing building. And again, that's providing jobs.

Stephen Brown: Absolutely. The timing is perfect. It's something you were thinking about doing anyway, and now there's even more incentive to push you into doing that. All of this is designed to support the vision of what we want the economy to look like.

Wade Carpenter: Yeah. And I was wanting to talk through some of the things that were actually set up for additional spending in the One Big Beautiful Bill thing. I think 46 and a half billion for border wall. 45 billion for detention facilities.

A lot of these may sound sound specialized. There's defense aviation funding, those kind of things. There [00:10:00] was some money in there, I think 12 billion or something like that for air traffic control towers. Some of the defense spending is not just, some of it's technical, but a lot of it is barracks that really aren't super complex, that you don't have to be a super technical contractor to do some of that type work.

There was also 50 billion that was out there for rural areas, like rural health projects. I think it was 10 billion in the next year. And then four hospitals that are in areas that are not well served in middle of the state here or wherever. But over the next five years, I think it's 20 billion for the years two and three, and then another 20 billion in years four and five. I think a lot of that's also going to help spur some of the local economy even in places that maybe the contractor doesn't wanna travel like you were talking about. So what's your thoughts on that?

Stephen Brown: No, I think that's great ' this money's gonna be spent and you need to be aware in your operating territory what they're talking about doing. It's always a good idea to subscribe to all [00:11:00] your congressmen and legislators' emails and communication ' cause they really are the first to announce something new that they're bringing their community. It's something they wanna show they've done for their constituents. Also all the reliable source, the business journals, the news journals, there locally. Because you know, here's the thing, when these things come up, everybody thinks, well, this money's gonna be spent in the next 30 days. And uh, no, the bill is priming the pump for the work to be done. For example, there are shovel ready projects the government has ready to go. There's tons of municipal projects that all across the country, there's divisions of the municipalities constantly working on their needs. Now, their repairs to current facilities and what they're gonna need in the future, future planning. That doesn't stop. These are the people you need to be talking to all the time to see what's coming up and what you should maybe focus on.

Wade Carpenter: [00:12:00] Yeah. And I'm glad you brought that up about like across the country. We did look at where's the money gonna be spent? And it's not really designed to be geographic, but certain projects are not necessarily the federal stuff, but where they're seeing some of these things like the tier one, like Arizona.

It was supposed to be a 311% year over year increase. And what's going on in Arizona, things like semiconductors. The data centers Texas is they're looking at a 53.7% increase year over year from the energy and manufacturing sections. And then Florida is about a 40.4% year over year, helping with population growth and as well as aerospace stuff.

So again, that was some of the top tier stuff. Some of the other ones I think have to do where was it? You know, If you're ramping up and places like Ohio this is the second tier. And like I said, they were starting lower.

Ohio was 90% [00:13:00] growth and year over year, that's what they're expecting. Georgia, where I am, 85% growth year over year, and North Carolina, about 32% growth year over year. So again, as you were talking about, like maybe if you're a contractor that is looking at traveling and you find your niche, you find what you do well.

I think there's definitely some opportunities out there and, whether you're traveling or whether you're have it in your current market. I think there's opportunity across the United States right now.

Stephen Brown: Absolutely. And I think a lot of times our listeners, Wade, might be a little confused about spending in the private sector versus the public sector. Because here's the thing. In the private sector, it's driven by interest rates and it's driven by incentives. In the public sector, it's driven by needs. Both of those kind of, go hand in hand together. For example, if you're a home builder, you're watching interest rates all the time. Because people just aren't gonna buy new homes unless they can finance them at a good [00:14:00] interest rate. But at the same time, whether interest rates are low or high, people still need housing. So you have a whole lot of growth in a certain part of your state that's gonna happen one way or the other. And, do you have to be the world's greatest economist to take advantage of this and understand your marketplace? No, but you need to be aware of timing. Timing is a number one issue. Timing of when these are gonna occur and when you need to act.

Wade Carpenter: Absolutely. That also leads into some of the thoughts that we had today. Because if you're scaling up, you need to think about that. We always caution against too rapid growth, but we see the boom times and the bus time, like the 2000 eights through tens. I see this as going into one of those boom times. And they're already talking about, with all the new growth they're needing like a 439,000 additional workers in 2025.

We've got some unemployment numbers that have dropped are looking good, but this may be a time to think about your people and [00:15:00] whether you have the right people in place, if that's your goal to scale up. I guess we go off in tangents here, but the AI and robotics and maybe it's a time that you should look at your entire operation.

Where you're focusing and if you've got things like your job costing and those kind of things in place to move forward. Because one of the key messages here is the workforce. You gotta have the people to get it done. 

Stephen Brown: That's a great point, Wade. It's really easy to move forward when you've got orders for more work than you can do. And you can demand higher prices for that work. Times are good. You're making a lot of money, and you're so busy you can't see the forest of the trees. but That's the time that you really have to manage money and start planning for the future. That's the time that you really need to hoard your cash, keep your cash, and decide how you're gonna use that cash to grow your company in the future, to maintain that cash flow and those profits, no matter what the economy's [00:16:00] doing. You still see so many smaller contractors, specialty contractors that just are sitting there.

I don't have anything to do. I've been hitting the phone, hitting the pavement, talking to every, what do you got What can I do for you? And that's when your profits go straight down when you go into that mode. 

Wade Carpenter: Yeah. And again, I know you brought up this, things like the data centers and stuff like that. What we were seeing they were kinda looking at, the premium pricing on some of this stuff. It was commanding like 15 to 25% above the standard rates they were getting on stuff like this to get the stuff done.

If construction gets in short supply and there's a lot of demand, this is a time that maybe you can raise your margins. You can raise your prices. 

Stephen Brown: And with those kind of raised margins and profits, you can take a little bit of more risk.

Wade Carpenter: Absolutely. it's a constant problem. Contractors get in bid situations and when you're trying to make cash flow to make sure we make payroll, that's one thing. When we get in these boom time, this is the time to transform a company.

This is the time to [00:17:00] say, Hey, we can actually get good work. If the competition ramps up, for a lot of the spending, there's not gonna be as many contractors out there competing in some of these markets. So it's a good time to rethink your strategies. One of the messages I think today is, if you've been doing certain things that haven't really worked out for you or, you've been struggling with the cash flow, it's a constant problem in construction, but. Some of these things are paying right now and we saw 2008, 2009, 2010, we see the boom times and the bust times. And the ones that come out of the bust times are, the ones that structured properly. But when we come into these boom times, we find that there's a new leaders in the market and this is a great time to, again, don't ramp up without looking before you leap, take some strategic decisions. Look at your strategy and where you're going with your business and, hopefully this is a time that you can really build that construction company that you always wanted. 

Stephen Brown: Absolutely. We [00:18:00] talk about media and information and resources that you can trust and that you can't trust. Engineering News Record , ENR, traditionally over the last 75 years has seriously focused on the economy and has stories about different contractors that are taking advantage of different market segments and how they did it and how they were successful. And so it breaks down absolutely what's going on in the economy. Also, trade organizations like the AGC have economists on staff and are totally plugged in on your behalf politically of what's going on there. Getting you the inside scoop of what's happening in your neck of the woods. You've got to see these opportunities and then what's the next step, Wade?

Wade Carpenter: I think it's the time to capitalize on them. 

Stephen Brown: You had a chart on geographic hotspots that I thought was really interesting.

Wade Carpenter: Yeah, that's where I was talking about the year over year increases and some places that haven't really gotten some increases, we're [00:19:00] looking at, just like Memphis, getting that unexpected increase with the data center there. It's gonna be spread around, but there are definitely some places that are targeted.

Not necessarily the federal stuff, but some of the energy stuff and the manufacturing is targeted at states that hadn't been getting stuff in the past. So maybe take some time and look at what's coming. 

Stephen Brown: Well, That's perfect, Wade.

Wade Carpenter: with that, you know, it's a great time to go back and look at what you're doing. We hope you found this episode helpful. We do this every single week. Every Tuesday we publish a new episode and we have done that for working on four and a half years now. We appreciate it if you've stuck with us this far. Like, share, and subscribe. It always helps us out. We really appreciate that. And we will see you on the next show.