Amid rising interest rates, fluctuating material costs, and persistent supply chain disruptions, the real estate and construction industry is entering a year of heightened uncertainty.
These challenges, while formidable, also present opportunities for innovation and growth.
Despite uncertainty, confidence among industry leaders remains strong. HLB International’s 2025 survey of business leaders reveals that more than three-quarters (77%) of respondents are optimistic about their businesses’ growth prospects this year — a figure that, while encouraging, shows a slight dip compared to the previous year.
However, when we widen the lens to the global economy, that confidence begins to waver. Only 26% of industry leaders expect global economic growth to increase in the next twelve months, while 20% foresee a contraction. Still, in certain regions, including India, South America, the Middle East, and Canada, optimism runs higher.
Top Risk Factors Threatening Growth & Stability in 2025
This stark divide in growth expectations indicates a key reality for 2025: growth will be uneven, and success will depend on the ability to navigate an increasingly complex landscape.
The top factors eroding business leaders’ confidence in 2025:
- Economic Uncertainty
A striking 83% of respondents reported economic uncertainty as their primary concern — the highest level recorded in five years. - Geopolitical Instability
Nearly 75% of respondents cited the cascading effects of global conflicts as their most significant concern. - Rising Resource Costs
Hardly unexpected, 71% of leaders reported struggling with the escalating raw materials and energy expenses due to ongoing inflation and supply chain disruptions driving operational costs and narrowing profit margins. - Cybersecurity Threats
Emerging as the fastest-growing risk, cybersecurity threats were cited by 67% of respondents. While this figure is slightly lower compared to the global cohort of business leaders, it represents a notable rise of more than 25 percentage points over the past five years, reflecting the sector’s growing reliance on technology and digital infrastructure.
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High Priorities: Efficiencies, Analytics & Employee Investment
In the face of these risks, real estate and construction leaders prioritize operational efficiency as a critical lever for resilience and growth, with 72% of respondents planning to streamline their operations in the next 12 months and more than half focusing on cost reduction and investments in their employees.
More than half of respondents aim to revamp organizational structures, while 50% are streamlining processes to eliminate inefficiencies.
Technology upgrades are also prominently featured on the agenda, with 40% investing in systems that enhance data analytics and operational agility. For many, AI is the linchpin of these efforts, with nearly 60% of respondents identifying AI as the most important technology for the next five years.
Only 9% of leaders believe their current business model is operating at optimal efficiency, while the remaining 91% see room for improvement.
AI Adoption & Integration: Proceeding … with Caution
While its application in real estate and construction is still evolving, leaders are cautiously integrating AI to enhance their operating models. Notably, 40% of respondents prioritize investments in data analytics, with 57% actively deploying AI to support this effort.
Beyond analytics, more than a third (36%) of leaders surveyed indicated that they intend to use AI to enhance business agility, 34% aim to upgrade technology systems, and 20% are leveraging it to refine organizational structures.
A CEO from the Asia-Pacific region emphasized how tools like ChatGPT and other new marketing technologies have played a crucial role in transforming their business models.
Additionally, two leaders from North America and LATAM highlighted how AI has enhanced their marketing efforts, with one citing the “speed in generating marketing content and data analysis,” and the other noting that “analytics of marketing has allowed us to focus our strategy on the right target audience.”
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Workforce Development & Engagement: Efforts Intensifying
Aware that efficiency alone will not solve all the sector’s challenges, industry leaders are increasingly focused on workforce performance, with nearly 60% of respondents agreeing that productivity hinges on individual circumstances.
Alarmingly, 7% report disengaged employees who frequently miss targets — a trend that could hinder growth.
Responding to these challenges, leaders are intensifying efforts to empower and engage their workforce. Over half of respondents plan to strengthen training and development initiatives this year, while 50% work to improve company culture and employee engagement.
AI Training & Upskilling: Lagging
AI also has a role to play here, albeit a more limited one: 27% of respondents are exploring AI-driven tools to enhance training and upskilling efforts. Still, compared to other industries, the sector lags in adopting AI for workforce transformation — a gap that could widen if not addressed.
Investments in rewards and remuneration are also on the rise, with 42% of leaders committing to enhanced compensation packages. Still, the challenges of succession planning and career development remain. As a result, almost half of the survey respondents prioritize these areas, recognizing that nurturing future leaders is essential for long-term success.
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Also Lagging: Innovation
Despite focusing on efficiency and workforce development, the real estate and construction sector continues to lag in innovation. Just 16% of respondents see themselves as “successful innovators.” Rooted in the industry’s traditionally risk-averse nature, barriers to innovation abound.
The adoption of AI in areas such as recruitment, customer analytics, and research and development remains low, hindering the sector’s ability to unlock new revenue streams.
While AI is being adopted, its direct impact on profitability is still unclear or not easily measurable for some businesses. For instance, when asked which AI application has most positively impacted profitability, a CEO of a family-owned European firm responded, “Good question — I would not know.”
Almost a third of respondents (32%) admit that fostering innovation within their organizations is challenging.
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Charting a Path Forward
As 2025 unfolds, real estate and construction leaders will need to strike a delicate balance: managing immediate risks while laying the groundwork for long-term transformation.
Leaders are shifting focus, with AI emerging as a top priority alongside cost reduction and investment in employees. However, technology still plays a minimal role in these transformation plans as innovation remains a significant challenge, and low adoption of AI further compounds the issue.
Get Ahead in 2025
Want industry-specific expertise to help you navigate the challenges and opportunities of today’s real estate and construction industries? Click here to discover the breadth of services Rehmann offers real estate and construction organizations.
This article was created in collaboration with HLB International, a global network of independent advisory and accounting firms. As a member of HLB, Rehmann enables its clients to enjoy access not only to 1,000+ Rehmann associates across nearly two dozen offices in the United States but also more than 40,000 tax and advisory professionals operating in 150+ countries.