After the larger-than-expected Republican election victory, let’s step back and look at what it means for the U.S. AEC industry. The three biggest drivers for our industry are (1) the huge amount of infrastructure funding from the IIJA and IRA acts, (2) the effects of interest rates on housing and other interest-sensitive sectors and (3) the amount of capital investment made by U.S. industrial clients. 

Let’s first look at infrastructure funding. Most of the current funding is scheduled to be allocated by the feds to state/local agencies by late 2026. This may be delayed a bit but probably not beyond 2027. That means proposal activity for design firms will likely peak sometime during Trump’s term, whereas firms that are big into construction services should see strong funding for several years after that. Some people believe that there will be another round of federal infrastructure funding that will keep the AE design sector going. I’m not so optimistic. The public will see the peak of construction activity well beyond the end of Trump’s term.  So, if there is political pressure to make another round of federal infrastructure funding, it will likely not happen during Trump’s term. I believe there will be a period of several years in which AE design proposal opportunities start to decline before we see another round of significant federal infrastructure funding. 

What about the direction of interest rates and their impact on the AEC sector? Given the recent 25 basis-point cut following the election, the Fed currently seems in the mood to continue cutting rates. Unless we see an unexpected bump in inflation, these cuts should continue for the near future. The resulting stimulus to private-sector markets could potentially more than offset any drop in infrastructure funding because the AE industry generates twice the revenue from private-sector clients than from public-sector clients. The bellwether here is the housing subdivision market which is now in the process of recovering as interest rates come down. As interest rates keep dropping, I foresee an increasing demand for AE design services from private sector developers and other interest-sensitive private sector clients. 

Let’s look at the industrial sector. This sector has historically been a relatively small contributor to AEC revenue.  But that is changing. As shown below, there has been a dramatic increase in capital investment by industrial clients, largely driven by industry-friendly policies from the Biden administration. The next Trump administration should be even more friendly to American industry, so this trend should continue or perhaps even accelerate.

So what should you do to assure that your firm thrives in the coming years? Here are my recommendations:

1.    For your strong markets (e.g., infrastructure), prepare for the coming downturn

• Focus your BD efforts on clients that will be getting funded even after the federal monies run out.

• Extend the good times by providing construction services

• Start planning for when the infrastructure markets start to decline

2.    For weak markets (e.g., developers), prepare for the next upswing

• Call on new strategic clients

• Hire key strategic positions

• Make strategic acquisitions

3.    If you’re not currently in the industrial sector, plan to get in either through acquisition or strategic hires. Not only is this market going to continue growing, it has historically been one of the most profitable markets for AE firms.