Construction subsector trends

The different trends observed across the construction industry remain apparent when focusing on individual subsectors. In general, head contractors and business leaders involved in civil and infrastructure projects are faring the best in the current conditions.

After two years of challenging economic and market conditions, some parts of the sector have recovered more quickly while others are still near the bottom of the trough. The foundations for growth are in place across most parts of the industry, but it remains to be seen how businesses will be able to stimulate future growth in uncertain times.

Civil infrastructure, residential and commercial projects

When looking at sentiment in the construction sector by project type, there is a clear leader: civil/infrastructure. 69% of business leaders working on these projects are currently feeling positive about their overall business performance, increasing to 77% when thinking about performance in six months’ time. This is significantly higher than the commercial and residential subsectors, where profit margins are tighter and there’s less forward work

The future may be looking brighter for civil and commercial subsectors. The MBIE National Construction Pipeline Report 2024 says intentions are high for non-residential activity, although this will rely on local and central government funding initiatives. The Government’s Budget 2025 announcements – including infrastructure spending and the Investment Boost - will also likely stimulate activity in these subsectors. Accordingly, it’s the civil sector that’s most in need of new staff. 42% say they will be actively looking for staff in the next six months, considerably more than 28% in commercial and 29% in residential.

“It’s encouraging to see civil/infrastructure business leaders feeling prospective about their business performance. We hope to see an uplift over the coming months as announcements made in Budget 2025 become a reality. This includes the Investment Boost tax incentive, establishment of Invest New Zealand and allocated infrastructure spend across health, education, defence and rail. There’s a promising pipeline of work ahead and it will be key to keep the pace of near-term projects moving to not only bolster the sector, but address the nation’s infrastructure deficit.”

Sean O’Meara, BDO Project and Infrastructure Advisory Regional Director

Meanwhile, the residential sector remains under pressure across Aotearoa, although we are now seeing areas of resilience and growth. Home sales and house prices are picking back up, and while Stats NZ data shows new dwelling consents were down 5.2% in April 2025 vs April 2024, the rate of decline seems to have slowed.

Our BDO Construction Sector Report shows that the forward work position and profit margins for the residential space are similar to 2024. As macroeconomic conditions flow down into consumer and business confidence, we can expect to see more residential activity in the coming months.

Head contractors and subcontractors, consultants and materials/supply chain

Head contractors appear to be slightly better off than subcontractors, with 63% saying they feel positive about their overall business performance now and 70% expecting to feel positive in six months’ time. They’re feeling slightly more positive about their cash flow and labour supply than other business types, indicating they may be better equipped to weather the economic storm and jump on new opportunities as they arise.

Head contractors also have a more comfortable forward work position than their subcontractor peers. 48% have sufficient confirmed work beyond 12 months, compared to just 26% of subcontractors. Worryingly, this forward work position for subcontractors has dropped from 40% in 2024, suggesting there may be increased competition for fewer projects.

More positively, subcontractors have high expectations for their profit margins in the next 12 months. 40% expect profit margins to grow, compared to 35% of head contractors. Profit margins have increased slightly for both head and subcontractors year on year.

Recruitment intentions are similar for head and subcontractors, with the majority of respondents saying current staff levels meet their needs. While a small number expect to make redundancies over the coming 12 months, just under a third of head contractors and subcontractors will be actively looking for new staff. Happily, confidence is relatively high in filling these vacancies.

Meanwhile, those working in consultancies appear to have a relatively healthy forward work pipeline and many are actively looking for staff. Materials and supply chain leaders appear stable, although their forward work position seems more concerning than the other groups.

*Note: The 2025 BDO Construction Sector Report does not have a statistically significant dataset to report statistics on materials/supply chain and consultancy