Issue 4, 2025
Welcome to our fourth issue of The Site Report for 2025! In this edition, we address the impact of tariffs, the AI revolution, the use of drones, an update on the universal reciprocity law, examining issues with office to retail space transitions, the data centers boom and the impact of data breaches on the industry. We also spoke with Spilman attorney Jonathan Deasy about best practices when it comes to contracts for the construction industry.
Thank you for reading.
“Despite exemptions for key building materials, import taxes announced by President Donald Trump could lead to a slowdown in new work, experts say.”
Why this is important: President Trump’s new tariffs are expected to raise construction material costs and create uncertainty in the industry. While some materials like steel and aluminum were already subject to tariffs, rising prices and potential delays are likely to slow future commercial construction investment. Labor shortages, exacerbated by immigration policies, are further expected to add to this uncertainty and may even pose a greater challenge to overcome than material costs. Ultimately, uncertainty around tariffs makes it harder for businesses to plan and budget for new projects, potentially leading to cancellations, delays, or reduced investment. If construction slows, it impacts not just builders but also suppliers, workers, and local economies that rely on these projects. Additionally, the risk of higher costs and disrupted supply chains could weaken the competitiveness of U.S. industries reliant on construction, from manufacturing to technology. Contractors should therefore manage cash flow carefully and make purchasing decisions on a case-by-case basis. --- Jonathan A. Deasy
“Generative AI is the tech buzzword of the decade; American Big Tech firms alone announced an investment of $300bn in AI infrastructure.”
Why this is important: Despite the daily barrage of articles, discussions and news stories related to the development and use of generative artificial intelligence (AI), the construction industry may be one of the slowest industries to embrace AI technology. Part of the reason for this relates to the very nature of the construction industry’s work product. Large language models (LLMs) were initially developed for written text, not for product details, architectural renderings, CAD drawings, and documents filled with architectural, engineering and construction instructions. AI was not focused on analyzing construction data needed to bring projects to life in three-dimensional planning.
The landscape for using AI is expanding so that the construction industry can take advantage of the technology. AI can now monitor live stream video from a job site so that the contractor can monitor safety for workers. AI can analyze 3D building scans to building design teams and help identify construction and planning conflicts for various tradesmen. AI can help with automation of digital and mechanical systems. Further, Agentic AI allows AI to learn from prior mistakes that can be useful on repetitive projects and designs. Called Hierarchical Reinforcement Learning (HRL), goals are broken down into sub-goals for more accurate construction planning and implementation. Creating industry-native environments in which AI agents can work will help the industry improve construction durations, reduce the variety of skills and numbers of contractors in a time of labor shortages, and allow for adaptable construction practices as unexpected issues arise during construction. --- Stephanie U. Eaton
“They provide precision mapping, faster data collection, smarter decision-making, visual documentation and enhance worker safety.”
Why this is important: I recently had my roof replaced through my insurer after incurring hail damage to my shingles. It is not surprising that my insurer sent out an inspector to confirm the damage to the roof, but what was surprising was that the inspector never stepped foot on the roof. Instead, he used a UAVs to quickly determine and estimate the damage caused by the hail. The result? A quick 5 minute inspection without any risk of a workers’ compensation claim for an inspector falling off the roof, and less time spent on my property.
This article highlights a few of the ways drones are being used to improve efficiency, reduce work-place injuries, and ultimately save costs. Whether it is to track equipment and prevent theft, or to reduce liability exposure to personal injury or workers’ compensation lawsuits, drones are a vital modern tool in modern transportation and construction projects. According to an ASCE study, the use of UAV technology yields an average cost benefit/return on investment of up to 980 percent.
The age of drones is clearly here to stay. Consult with Spilman Thomas & Battle to learn how our firm can help reduce your company’s liability exposure through modern technology. --- James T. Taylor
“'Universal licensing will ensure that contractors, electricians, doctors, nurses, realtors, and other skilled workers can move to West Virginia and get to work right away.’”
Why this is important: On April 7, 2025, Governor Patrick Morrisey signed the Universal Professional and Occupational Licensing Act, allowing licensed professionals from other states to work in West Virginia without additional exams. The law aims to boost economic growth by attracting skilled workers and has been praised by business and industry leaders for streamlining hiring and addressing workforce shortages. This is important because it makes West Virginia more competitive by removing bureaucratic barriers that often discourage skilled workers from relocating. By allowing professionals to start working immediately, the state can more quickly fill labor shortages—especially in critical sectors like healthcare and construction—and stimulate economic growth. It also positions West Virginia to attract new businesses and investment, while the related Power Generation and Consumption Act could further diversify the economy and reduce tax burdens for residents. --- Jonathan A. Deasy
“With office vacancies projected to hit 20% in 2025 and retail construction slowing due to high costs, building owners are finding new revenue opportunities by transforming idle office square footage into dynamic, mixed-use spaces—fueled by adaptive design and digital permitting tools.”
Why this is important: Following the COVID-19 pandemic shut-downs, there was no shortage of vacant buildings and “For Lease” signs hanging in windows or on doors of office buildings and retail establishments. By the end of 2025, office building vacancies are expected to reach 20 percent of existing office space. Coupled with high new construction costs, developers are finding ways to creatively renovate empty offices and darkened shopping malls into dynamic mixed-use spaces.
This article highlights several challenges developers faced with retrofitting empty retail and office space. For example, many retail layouts are very different from office space layouts. Building facades in many cases were customized for the prior tenant. There is also a different level of foot traffic associated with retail from that of office space. Further, there can be delays and hurdles with zoning, regulatory and permitting the new space.
There are solutions to these challenges. Fueling some of these transformations are a mix of construction innovations that can improve efficiencies, reduce the amount of reconstruction needed, and integrate building systems for new use. Some of the innovations developers are using are:
- Use of modular partition systems that have utility- and/or sensor-embedded movable walls that allow flexible spaces sizes and tenant usage;
- Installation of adaptable building facades made of smart glass, digital signage or motorized panels for faster installation and customization with minimal construction;
- Addition of acoustical management systems to more effectively control noise for a myriad of potential uses for the old space; and
- Access to digital permitting platform and AI that can create compliance checklists and filings.
By transforming unused space instead of constructing new space, these developers not only avoid higher new construction costs and potential supply chain and other issues, but also contribute to a more sustainable building practice. --- Stephanie U. Eaton
The Data Center Boom Continues, but Pitfalls and Questions Remain
By Carrie H. Grundmann
The energy needs of data centers continue to grow, seemingly unabated. According to this Utility Dive Article, a report from the National Electrical Manufacturers Association (NEMA) estimates that data center demand (and transportation electrification) will cause U.S. electricity demand to rise two percent year-over-year for the next quarter century. In the near term (the next decade), data center demand is projected to grow 300 percent. The Trump administration has been playing an active role in facilitating the growth of data centers and the global race for AI dominance. Following on President Trump’s Executive Orders from January 2025 on AI and U.S. energy security, the Department of Energy (DOE) recently announced plans to make its DOE-owned land at 16 locations available for data center development. They have since issued a request for information (RFI) to gather feedback from industry experts on how to use this land to further data center development, advocating in favor of a public-private partnership model.
Click here to read the entire article.
"Data breaches are rising across industries, hitting healthcare, finance, and retail especially hard.”
Why this is important: Data breaches impact all aspects of a business. The most significant impact data breaches have on every industry is the rise in costs associated with a data breach. The contributing factors to the rise in costs include the cost of the business disruption that results from a data breach, regulatory fines imposed by regulators, the post-breach response, and the reputational damage that may carry on far into the future. Data breaches can also increase the cost of borrowing money, which is the case with the healthcare industry in the form of credit downgrades as a result of cyberattacks. With this continual rise of costs associated with a data breach, preparedness in advance is required. This includes extensive employee training to recognize the risk of an outside attack, installing all software patches to close known vulnerabilities, implementing multi-factor authentication, creating and testing incident response plans, auditing your data and discarding data your organization no longer needs, and obtaining cybersecurity insurance. However, not all cybersecurity insurance policies are created equal. Many cybersecurity policies lack sufficient coverage in the event of a data breach or exclude common avenues of attack from coverage. It is important that you work closely with your insurance broker and counsel to get adequate insurance coverage. Unfortunately, obtaining sufficient coverage comes at an increased cost, thereby perpetuating the cycle of increasing costs caused by data breaches. --- Alexander L. Turner
Feature Attorney Profile
Jonathan A. Deasy
Question: Litigation in the construction industry stems from a variety of issues, but many do not think about the consequences that arise from poorly drafted contracts. As an attorney who focuses on construction litigation and contract formation, what best practices do you employ when drafting contracts and what words of wisdom do you have for companies doing the same?
Answer: Construction contracts are their own kind of animal. While the basics for all contracts are the same across most industries, construction industry contracts need great care and forward thinking for the best outcomes. Fortunately, construction professionals and their attorneys often rely on standard industry forms when it comes to the formation and performance of a construction contract. These forms are published by various professional associations, such as the American Institute of Architects (AIA), with key terms left open for negotiation between the parties. With these key terms left open, we’re able to focus our attention and get ahead of the issues that frequently arise on any given construction project.
In that regard, a detailed project timeline that considers changes to that timeline is imperative. The start and end dates, milestones, deadlines, extensions, etc. can be out of your control. But providing details for each scenario helps protect you in the inevitable occurrence of delays. Along with the schedule, payment terms should be extremely clear. The contract price (lump sum, cost-plus, or unit price) and schedule should be clearly stated. But do not forget to include progress payments, retention, and final payment terms. In today’s world of tariffs and supply chain issues, the schedule and payments can be impacted significantly. You want all of the potential scenarios covered in writing.
Speaking of having things in writing, make sure you address change orders within the contract. How does the client want change orders documented? How do you want to receive change orders? Establish the system in the contract and stick to that system. It will help with the potential headaches that will occur over the life of the project. Also, address force majeure issues now. The more you have thought through these issues, the better you will be if they occur.
With all projects, and especially in construction, there can be disputes. How will disputes be handled? Mediation? Arbitration? Litigation? And just because you would like to handle disputes in a certain way, you need to make sure you are following local and state regulations and what each jurisdiction requires. One thing to note about AIA contract forms is that they are the oldest, most well-known, and most widely used in the industry. As a result, they have been extensively litigated over the years, resulting in a significant body of case law interpreting the forms in many jurisdictions. Such a large body of case law certainly helps streamline any dispute and serves to benefit all parties involved.
Additionally, insurance and bonding requirements (if appropriate) should be spelled out, and you really should have an attorney who is well-versed in those particular issues. Many firms may consider themselves “experts” in construction contracts, but are lacking when it comes to these types of details. Legal compliance for insurance, bonding, local building codes, labor laws, licensing requirements, safety regulations, environmental and zoning issues, etc. are foremost when it comes to construction contracts. Your attorney should understand all of the above and be as thorough as possible in including that information within the contract.
Finally, and perhaps most importantly, indemnification cannot be overlooked. Any sort of indemnification-related provisions are heavily negotiated between the parties and, when properly drafted, can offer an extensive layer of protection – in addition to any insurance and bonding requirements – in the event of a dispute. These provisions, however, are only given effect when clearly and explicitly stated in the contract. As a result, it’s critical that construction professionals and their attorneys consider each and every event that may trigger indemnification and tailor their language accordingly in express terms. The inclusion (or exclusion) of a single term can sometimes make or break the question of whether or not a contractor is entitled indemnification for a particular event.
