Construction activity still strong, as headwinds prevail

Photo: South Burlington City Center. VermontBiz photo.

VermontBiz Large infrastructure projects on interstates, highways, side roads and downtowns are a headache when you’re running late, or are running early and are about to be late. Some projects seem like they will never conclude. In some areas of the state, locals would be thankful to have the annoyance of construction, as there is in Chittenden County. These last dozen years have seen profound major developments in Vermont helped by low interest rates and plenty of federal spending.

So those factors have come to an end, except where projects were already underway. The construction labor market is still tight, which has been a choke point as credit is now. Still, alternative means of investment are continuing to provide housing project opportunities, as supply is still tight. And perhaps the Fed will cut interest rates at least a little, even as the overall economy can’t quite shake off inflation.

Despite all that, there is good news in the construction industry as Vermont continues to show a resilient economy.

“In terms of the construction market, we are seeing continued growth in residential development in Chittenden County. New construction of single-family homes as well as multi-family residences remains active, consistent with demand. A local commercial real estate expert recently related hearing from a larger developer that higher end new construction apartment units are not renting as quickly of late,” said Tom Leavitt, president of Northfield Savings Bank.

“The economics of lower priced offerings are challenging for developers, making it difficult to achieve viability without subsidized funding sources. Major affordable housing players continue to wrestle with a five-year escalation in building costs along with some pullback in federal funding. Tariffs have had an effect of injecting uncertainty about a return of inflation in materials.

“The demand for existing homes may be slowing some as properties are staying on the market longer, with more evidence of open house events and some negotiating room for buyers. In Central Vermont, middle market housing demand is strong, though fewer buyers are willing to waive home inspections than was previously the case.

“We believe that interest rates moderating and stabilizing somewhere below 6.00% will result in healthier balance in the market, with secular tight inventory conditions loosening. The new Community Housing & Infrastructure Program (CHIP) passed by the Vermont legislature is a good outcome of forces coming together for progress, advanced by the Let’s Build Homes coalition.”

Dan Werme, NBT Bank Regional President of Vermont, cited many of the same concerns, and noted that the workforce situation is improving:

“We’ve seen a noticeable slowdown in new construction this season, largely driven by uncertainty. Developers are holding off, hoping for lower interest rates and clarity around potential tariffs that could impact material costs. This volatility makes it difficult to lock in budgets, and rising costs are squeezing project feasibility.

“Labor availability is improving, likely due to fewer active projects, but that could reverse quickly. In this environment, having a strong relationship with your banker is critical. They can help you stay agile and financially prepared as conditions shift.

“We are also seeing weakness in new residential unit sales, and newly built homes aren’t moving as quickly as they once did. While lower interest rates could help, the underlying issue remains: demand still outpaces supply across much of the state.”

The contractors themselves expressed cautious hope.

Marcia Lertola of Naylor & Breen in Brandon, said: “2025 is another busy year for us — tracking similarly to 2024 — and we’re seeing a strong backlog into 2026.

“We’re seeing activity among multiple types of projects, from commercial to multi-family housing, educational facilities, and private residential.

“We have seen a slowdown in the condo market at various ski resorts, perhaps due to the increased Vermont property transfer tax on second homes.

“Some clients are continuing to struggle with the permitting process, with resulting delays in the construction phase. That process sometimes deters investors from moving forward with a project at all.”

Johnny Illick, CEO of ReArch in South Burlington said: “The construction industry in Vermont remains strong, but there are several factors creating headwinds for both owners and builders. The labor market continues to be one of the biggest challenges.

Photo: Johnny Illick, president of ReArch. Courtesy photo.

“Beyond labor, material tariffs are adding a layer of uncertainty. These costs fluctuate, making it difficult for owners to decide whether to move forward with projects, as budgets can shift dramatically during planning. This uncertainty also makes banks and other funding sources cautious, since open-ended allowances do not provide the security they look for.

“As a result, we’ve had to get creative to help projects advance while maintaining financial feasibility. Developing alternative approaches to structuring contracts and budgets has been critical in ensuring projects stay on track, owners remain confident, and banks feel secure in their financing.

“In summary, Vermont construction is active and evolving, but strained by labor shortages, tariff-driven cost volatility, and financing complexities. The industry is responding with new solutions like VCA and innovative project delivery strategies, while the state must also look to population growth as a key long-term solution.

“Yes, interest rates and tariffs are affecting both our business and the construction industry as a whole. Rising interest rates are increasing financing costs, making both project owners and financial institutions more cautious. Similarly, tariffs are introducing price volatility, creating uncertainty for owners, and making it harder for them to commit to projects. Lower interest rates and more stability around tariffs would help accelerate project timelines.

“In today’s environment, projects often require more time, effort, and innovation to move forward. As mentioned earlier in relation to Vermont’s construction sector, lenders are wary of open-ended allowances because they lack the security needed to instill confidence. To navigate this, we’ve been finding creative ways to structure contracts and budgets that keep projects on track and meet the needs of both owners and financial partners. While demand remains strong, the current economic climate is slowing development. Our focus remains on working closely with all stakeholders to find innovative solutions that ensure critical projects move forward, despite the challenges.”

DEW Construction President Matthew Wheaton said: “DEW Construction (based in Williston) is only able to comment on the markets we’re active in, but those markets remain stable today. In 2025-26 our current contracts include multi-family (the highest percentage of contracted dollars), healthcare, education, government, hospitality, and manufacturing (lowest percentage of contracted dollars).

“DEW’s contracted 2025 work remains stable in part because we diversify, but also because we select projects and clients that are a good fit for our team and culture. 80% of our contracts are under $20 million, which is normal for a construction manager of our size, and our projected backlog into 2026 is very encouraging.

“But even with all of this optimism, we remain cautious and mindful of the impact interest rates have, we remain focused on managing overall construction costs and locating the most appropriate subcontractors — all because we see how hard it is to get projects to “pencil” for our clients.”

Andrew Martin, CEO of Neagley & Chase Construction Company in South Burlington, said: “The year-to-date has been very successful, with a diversified cross section of project types, including two recently completed sizeable affordable housing projects in Berlin and Windsor, Vermont. We have a strong backlog that includes commercial housing, water and wastewater treatment, and healthcare infrastructure projects.

“The rising costs of construction, a large part of which can be attributed to labor costs and the current demand for limited resources of skilled labor, continues to be a challenge. That, combined with material escalation, requires creative approaches to align a project’s scope with an established budget or proforma that may have been developed a number of years in advance of construction.

“The cost of mechanical systems has been one area in particular that has seen significant increases. Utilizing systems that minimize the extent of ductwork and distribution piping reduces both material and labor costs. To that end, we are being proactive with design teams during preconstruction to incorporate as many smart cost saving ideas as possible early in the conceptual design phase in an attempt to avoid redesign efforts and stay ahead of continued escalation.

“Clients that have constructed projects outside of Vermont or the immediate region are always surprised by the higher cost of construction here. We work hard to temper that differential, and that is a challenge that we see continuing well into 2026. Current interest rates add to the list of cost impediments, and a reduction in interest rates would certainly help to move projects forward in Vermont, as well as reduce the extent of projects that get scaled back or put on hold due to cost concerns.

“Supply chain issues have abated a bit but lead times on electrical switch gear and transformers are still problematic. Again, creative work-arounds, such as the use of remanufactured components, are ways to mitigate schedule impacts due to lead times.

“We are optimistic about the opportunities in 2026. Challenges have always been a part of our industry. We are problem solvers, and the development of creative solutions is the key in working through these challenges.”

Crystal S. DelleChiaie, Director of Marketing and Communications, at PC Construction, said: “As we move into the second half of the year, we continue to see a slowdown in active construction starts. While there are many projects in the planning and preconstruction stages, many of the larger projects are either continuing to experience delays or are even facing the possibility of not proceeding due to the variety of factors, including interest rates and access to financing. The market seems unusually quiet for this time of year. While opportunities exist, they tend to be smaller in scale and the competitive landscape is becoming increasingly crowded.

Additional concerns:

• A slowdown in the architectural/engineering industry.
• The current economic instability, including political unease, tariffs and other factors.
• There was a significant slowdown in contractor work in the Boston metropolitan area, so we are seeing increased competition further North.
• “Despite the challenges, there are a lot of successful projects currently under construction.

“In St. Johnsbury, we are well underway with an expansion at Weidmann Electrical Technology’s manufacturing facility, the same facility we expanded just over a decade ago. The project, which will allow Weidmann to increase manufacturing capacity, includes three major components: the construction of a 10,000-square-foot free standing pre-engineered warehouse building; a 21,500-square-foot addition to their existing finished goods production space; and material production upgrades within the existing manufacturing plant. The project received substantial support to expand operations at this site, including nine sources of funding and a New Market Tax Credit. This is a perfect example of why it is so important we continue maximizing resources to encourage investment throughout the entire state.”

Photo: Weidmann Electrical Technology facility expansion in  St. Johnsbury  Photo courtesy PC Construction.

Meanwhile in downtown Burlington, the highly anticipated AC Hotel Burlington Downtown — part of Marriott Bonvoy’s AC Hotels brand – is set to debut this fall, marking the first AC Hotel in Vermont. The hotel is owned and managed by Giri Hotels, a family-owned and operated hospitality company that owns and manages 56 hotels across the Northeast. 

As part of Burlington Square’s redevelopment by local developers Dave Farrington, Al Senecal and Scott Ireland Giri Hotel Management, a Quincy, Mass.-based company, has become a minority partner. Giri will operate 350 rooms in two hotels when the entire project is complete. The South Tower, with the AC Hotel, is nearly complete and the North Tower is underway.

Covering the long-vacant “Pit” on Bank Street near Church Street Marketplace, AC Hotel will include 161 upscale guestrooms, while the top floors feature 53 luxury apartments. 

Centrally located at the former Burlington Square Mall, and coming after the site was demolished in 2018, the hotel offers sweeping views of Burlington’s skyline and easy access to the city’s dining, shopping, and cultural scene. The location will also provide proximity to key transit and regional access, with the hope that it will revitalize pedestrian life and stimulate downtown’s economic growth.

Onsite highlights will include:

• AC Kitchen — European-inspired breakfasts featuring fresh, locally sourced ingredients
• AC Lounge — Craft cocktails and locally inspired small plates
• Naturally lit meeting and event spaces ideal for gatherings and corporate travel
• Modern fitness center and complimentary Wi-Fi

Associated General Contractors of Vermont Celebrates 90 Years

The Associated General Contractors of Vermont marked its 90th anniversary in July with a special Southern Celebration hosted at Casella Construction’s newly expanded facility in Pittsford. This milestone event honored nine decades of leadership, advocacy, and innovation in Vermont’s construction industry. For 90 years AGC/VT has led the way as Vermont’s construction association. AGC/VT has been recognized both nationally and internationally as a leader in training and advocacy over 30 times in these 90 years.

“AGC/VT has been the voice and the foundation of Vermont’s construction industry for 90 years, continuously working to Build a Better Vermont” said Richard Wobby, Jr. Executive Vice President. “This celebration is not only about honoring our past, but also about recognizing the people and companies — like Casella Construction — who are building Vermont’s future.”

Photo: Richard Wobby, Jr, executive vice  president, AGC/VT. Courtesy photo.

Casella Construction’s facility represents a significant investment in the region and a commitment to a sustainable workforce, high-quality construction practices. The ribbon cutting highlighted the company’s achievements and its partnership with AGC/VT in promoting excellence across the industry.

AGC/VT was recognized for having spent 90 years educating and advocating for Vermont’s construction industry through a variety of strategic efforts aimed at influencing policy, educating Vermont’s construction industry in skills and safety, and ensuring members’ voices are heard at the Local, the State and National level.

Employment

Johnny Illick of ReArch said: “With a statewide population of just over 600,000, the number of young people entering the trades is not keeping up with demand. This shortage adds a cost premium to building in Vermont and limits the pace at which projects can move forward.

“To help address this, ReArch Construction, in partnership with PC Construction, the ABC NH/VT Chapter, and many other contractors and subcontractors, has launched the Vermont Construction Academy (VCA). VCA is an industry-driven trade school where 100% of the curriculum is designed and developed by the construction industry itself. The goal is to create a direct pipeline of trained workers to meet the rising demand across the state. At the same time, we recognize that to solve the labor challenge long-term, Vermont needs to grow its population. Expanding the workforce is essential to support both construction and the overall economic health of the state.

ABC NH/VT reported in July that New Hampshire continues to be a national leader in construction employment, boasting one of the lowest construction unemployment rates in the country for June 2025, according to a state-by-state analysis released today by Associated Builders and Contractors (ABC).

New Hampshire recorded a 1.3% not seasonally adjusted construction unemployment rate in June—the third-lowest rate in the nation, behind only South Dakota (0.8%) and North Dakota (1.2%), and tied with Montana and Oklahoma for a spot in the top five. Vermont ranked tied for 23rd at 3.0%. NH and Vermont had the lowest rates in the Northeast. The US average is 3.4%. Rhode Island and New Jersey had the highest rates, pushing 9%.

“Both states face workforce constraints due to smaller populations and aging demographics, leading to fewer unemployed workers overall. I believe NH’s numbers are tighter than of VT because New Hampshire had a faster economic recovery post-COVID compared to other states which sustained the Granite State’s construction employment,” said Josh Reap, President & CEO, New Hampshire/Vermont Chapter, Associated Builders & Contractors.

There are several workforce development programs to assist the trades.

Pre-Apprenticeship in Timber Framing and Construction Pathways supports the launch of Vermont’s first formally registered pre-apprenticeship in timber framing. Operated by VYCC in partnership with Building Heritage and the Timber Framers Guild, this 17-week program prepares youth for careers in construction and the skilled trades.

Five participants will receive weekly stipends and skills employers value while constructing a timber-frame compost facility and assisting with restoring a historic barn at VYCC’s Richmond campus. The program’s curriculum aligns with a 2,000-hour Registered Apprenticeship in Timber Framing, developed and approved by VDOL and the Timber Framers Guild.

This grant creates a clear and structured pathway into Vermont’s construction workforce. Participants gain foundational skills in carpentry, safety, and project planning while exploring opportunities such as trade school, a Registered Apprenticeship, or direct employment.

Also, the Vermont Sustainable Jobs Fund (VSJF), in collaboration with Efficiency Vermont and Vermont Gas Systems, in August graduated the inaugural cohort of Tools of the Trade — Business Fundamentals for Energy Pros, a business coaching program designed to support weatherization and clean energy contractors across the state. A new program begins in October.

The program offered participants practical training in business fundamentals tailored to weatherization contractors, energy audit businesses, electrician firms, and builders who specialize in renewable energy and energy efficiency.

Monthly in-person sessions, one-on-one coaching, and peer learning helped contractors strengthen skills in workforce recruitment and retention, financial management, operations, customer engagement, and leadership. The program was made possible through funding from the State of Vermont, Efficiency Vermont, and Vermont Gas Systems.

“This program was a fantastic jump forward for me as a business owner,” said David Bailey, of Black Cat Builders, Tools of the Trade Participant. “I wish it had existed ten years ago!”

The inaugural cohort included seven businesses from across Vermont:

• Black Cat Builders, LLC — Plainfield
• Han Hewn, LLC — Duxbury
• Lode Stone — Pittsfield
• Maheux Heating and Refrigeration Inc. — Jericho
• Solar Harvester — Hardwick
• Solsaa Building and Energy Solutions — Rutland
• VT Exergy LLC — Bristol

“Watching these business owners grow over the course of the program has been incredibly inspiring,” said Kurt Ericksen, Vermont Sustainable Jobs Fund’s Tools of the Trade Program Manager. “They showed up with curiosity, a willingness to learn, and a deep commitment to their craft and communities. Their progress is a testament to what’s possible when we invest in workforce and business development as much as investing in technology and infrastructure.”

Graduates are now better equipped to grow their businesses, serve more Vermonters, and contribute to the state’s clean energy goals by helping residents save money, improve home comfort, and reduce greenhouse gas emissions.

Meanwhile, Tools of the Trade — Business Coaching for Energy Pros is a nine-month, in-person business training program designed to help Vermont weatherization and clean energy contractors strengthen and grow their businesses.

The program begins October 20 and runs through June 2026. Applications are due by September 12, and selected businesses will be notified by September 26. The cost is $1,000 per company (valued at $7,000).

Participants will learn how to recruit and retain workers, manage finances, improve operations, identify and reach ideal customers, and build a strong company culture. The program includes monthly half-day sessions, one-on-one coaching, peer learning, and access to industry professionals such as employment attorneys and workforce training providers.

“This program was a fantastic jump forward for me as a business owner — I wish it had existed ten years ago,” said David Bailey of Black Cat Builders, who completed the Tools of the Trade program in June.

“This program gave me the confidence to keep growing my business and improve relationships with my employees,” said Eric Solsaa of Solsaa Building and Energy Solutions, who completed the Tools of the Trade program in June.

Go to vsjf.org for more information.

Tools of the Trade is funded by Efficiency Vermont, Vermont Gas Systems, and Burlington Electric Department.

Transportation

It does not seem it this summer, as drivers are stuck in traffic and re-routed from road to street to highway for road projects, but the Agency of Transportation is suffering from a combination of lagging funding mechanisms to support infrastructure projects at the same time that costs are increasing.

Costs are impacted by supply issues, wages, inflation and interest rates.

Revenues in the Transportation Fund have been sluggish for many years as vehicles become more fuel efficient. The COVID-19 pandemic also reduced commuting, which of course reduced consumption and the taxes and fees that go with it.

The rise of electric vehicles also reduces those revenues. The State of Vermont has introduced an infrastructure fee that will be collected in addition to the regular registration fee for all Plug-in Hybrid (PHEV) and Battery Electric (BEV) vehicles registered in the state.

BEVs are powered by electricity, and vehicle owners do not pay any gas or diesel tax. Owners of PHEVs pay significantly less gas tax than the owners of average internal combustion engine vehicles. Revenue from gas and diesel taxes supports the maintenance of the transportation system through the transportation fund.

The infrastructure fee will be collected when you renew your vehicle registration.

Photo: Ubiquitous road  construction, here on Dorset Street in South Burlington. VermontBiz photo.

The PHEV cost will be about 50% more ($91 plus $44.50 total $135.50) and the BEV is double the regular fee (less the $2 clean air fee) to $178.

Governor Scott has long been a supporter of EVs and his own official vehicle is one, but he removed a mandate on increasing sales of EVs last May (going from the current 12% to required 35% this year) because of the cost of EVs and the lack of charging stations and the high likelihood that the sales targets would be impossible to meet.

His administration then did not provide enough evidence, according to a District Court Judge in July, to support an appeal on about $16 million in federal funds for charging stations that had been withheld by the federal government. Vermont had supported the suit earlier this year but then did not follow up.

However, the federal government has backtracked for the most part and it appears Vermont will get the money after all.

According to a Seven Days article, the state was concerned about losing far more money in retribution related to the massive transportation bill the US DOT provides to states.

Vermont’s total FY26 transportation budget is $883.4 million, all in. The federal government is expected to provide $452 million of that. The road and bridge type projects require a state match of only 20-30% (of the $411.3 million for those projects, the feds are expected to contribute $308.7 million).

The funding concern is profound. According to the Vermont AOT, the estimated funding gap “is projected to be approximately $317 million starting in FY 2026. This gap is expected to widen due to significantly increased construction costs and the added pressure of inflation on operating expenses. As these financial challenges persist, the funding gap is anticipated to grow.” Gasoline taxes and fees will be the biggest culprits going forward.

But the feds in August agreed to release the EV charging money with some of the Biden Administration requirements for things like rural-area investment and minority participation stripped away.

The DC fast-charging sites, crucial to stop-and-go EV charging, are earmarked for Bennington, Berlin, Brattleboro, Manchester, Middlebury, Rutland, South Burlington, St. Albans and White River Junction, near Interstates 89 and 91, and along U.S. Route 7 and VT Route 9. Another fast charger was installed in Bradford in April 2024 and two others in Randolph and Wilmington are in process.

“While I don’t agree with subsidizing green energy, we will respect Congress’ will and make sure this program uses federal resources efficiently,” US Transportation Secretary Duffy said in a press release.

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