Last Updated on February 16, 2026

In an industry defined by slim margins, fixed budgets and long project timelines, rising costs are a major challenge, especially for new construction.

According to the consulting firm Rider Levett Bucknall, construction inflation rose 4.7% year-over-year in 2024. Mix that with cumulative increases since the pandemic, and an era of changing regulations, the financial impact is substantial.

Construction cost cutting is not about trimming around the edges or reducing the quality of the work. It demands creativity, innovation and strategic thinking to create a safe and productive work site.

In this article, you’ll discover practical, and potentially overlooked, ways to reduce expenses and improve your bottom line.

What’s Driving the Rising Costs of Construction?

First, it’s important to take a closer look at what’s driving construction costs in order to move forward. Since the pandemic in 2020, many have come to expect rising inflation, supply chain disruptions, labor shortages, severe weather and other global events that drive prices higher.

In 2025, the following factors are having a major impact on construction costs, making it difficult to plan effectively.

• Material Costs and Trade Policy: While the ultimate outcome of trade policy remains uncertain, tariffs affect the prices of imported materials like steel, cement and lumber. Higher tariffs, or unpredictable tariffs, make it hard to forecast your material costs and maintain reliable supply chains.
• Labor: Fewer young people are entering the trades, creating a shortage of skilled labor. When there’s a labor shortage, wages rise as companies compete for talent. This can increase overall budgets and cause costly delays if there’s an unexpected staffing shortage.
• Interest Rates: Elevated long-term interest rates can increase borrowing costs for developers and contractors. Higher rates can stall new projects, tighten cash flow and reduce the number of financially viable builds in the short term.
• Climate Mandates: Sustainability efforts and green building standards are gaining traction—but they often come with significant upfront costs. Meanwhile, proposed rollbacks in environmental regulations could lower compliance costs, but also pose challenges for firms focused on sustainable design.
• Demand: Strong demand for private development and publicly funded infrastructure is a double-edged sword. It generates opportunities for growth while increasing competition for labor and materials, ultimately pushing costs even higher.

Navigating today’s construction landscape is no easy task. Lingering challenges from the pandemic, coupled with shifting political priorities, have made planning and budgeting more complex than ever.

At the same time, ensuring workforce safety and security has become more critical, with rising costs and tighter regulations affecting both.

All this begs the question: How to reduce construction costs?

7 Tips for Reducing Construction Costs in a Challenging Economy

For those willing to adapt and explore new approaches, there are real opportunities to control costs, even in a volatile environment. Consider these construction cost cutting measures.

1. Use Modular Construction Techniques to Save Time

Modular construction (or prefabricated construction) is the process of manufacturing structural components off-site in a factory and assembling them on-site. These techniques can help you save time and labor costs.

Modular construction is suitable for a wide range of applications, from residential buildings and commercial spaces to warehouses and infrastructure projects. Their factory-built panels and modules ensure consistent workmanship and quality control. These elements can also offer great structural integrity, as they are designed to withstand transport and installation.

• Tip: Use modular construction techniques to help accelerate project timelines by up to 50%, reduce onsite waste and congestion, enhance safety and support significant construction cost cutting—by as much as 20% or more in some cases.

2. Rent Equipment for Maximum Flexibility without Ongoing Costs

Renting equipment is a practical option for reducing the cost of new construction, particularly when working with a rental provider with an extensive fleet of high-quality, well-maintained equipment, training support and dependable delivery.

When renting equipment, you get the latest technology right when you need it, without the significant upfront capital required if buying equipment. Plus, renting eliminates the need for you to pay for long-term maintenance and storage.

• Tip: Partner with a high-quality rental provider early in your project planning process. They can help you create backup plans that minimize the impact of unexpected events, such as power outages, severe weather or breakdowns in your own fleet.

3. Focus on Engineering to Enhance Value

When planning a project, firms can use techniques like value engineering to help make the most of resources and maximize overall value.

Unlike simple cost-cutting, value engineering analyzes each component of a building to determine if it can be redesigned or replaced with a more cost-effective alternative that does not compromise quality, performance or safety.

Materials are selected for durability, maintenance needs and sustainability, not just price. Value engineering also helps identify efficient construction methods to speed up timelines, reduce labor costs, and boost productivity of both workers and equipment.

For example, a value engineer may recommend post-tensioned concrete slabs over conventional ones for reducing costs of new construction. Another solution could be standard-sized beams instead of custom ones to cut costs and simplify sourcing.

• Tip: To have the greatest impact, you should adopt value engineering early in the design phase, where it can streamline complex processes, minimize risks, and improve scheduling and resource allocation.

4. Leverage Technological Advancements to Work Smarter

Technological advances have transformed every stage of the construction process, from planning to execution.

• Tip: Look for tools and partners that can offer technology to help you work smarter, safer, faster and more sustainably. This technology may include:
  • Digital platforms, such as Herc Rentals’ ProControl platform, that offer data in real time about when, where and how much equipment was used, preventing overbooking in the future. It can also help monitor fuel use, provide updates when a rental agreement is close to expiring and more. 
  • Drones to survey or monitor areas that are difficult or dangerous to access.
  • Wearable technology to track motion, temperature and air quality (like carbon monoxide) and support worker safety.
  • Automated machinery can take on repetitive or hazardous tasks, helping to reduce labor costs, speed up work and increase efficiency.
  • Augmented or virtual reality can allow immersive walkthroughs and hands-on training in a simulated, risk-free environment.
  • Building information modeling enables real-time collaboration among architects, engineers and contractors, improving design accuracy and coordination.
  • Construction software and mobile apps centralize project data and streamline communication. They support material management, cost and inventory tracking, scheduling, and team coordination in real time.

5. Improve Resource Management to Improve the Bottom Line

Effective resource management strategies to control costs, reduce downtime, minimize risk and eliminate waste can significantly improve your bottom line. It all comes down to having the right people, materials and equipment in the right place at the right time.

Since construction projects are complex and often unpredictable, you should expect the unexpected. Construction-specific software can help you track resources, manage schedules and respond to issues in real time.

• Tips: Resource management is all about strong planning. Make sure you:
  • Understand project demands, including delivery dates and phase completion dates.
  • Use benchmarks from projects of similar size and scope and analyze your past performance to identify where adjustments are needed.
  • Assign resources early to avoid shortages, delays or oversupply.
  • Implement just-in-time inventory so you are neither storing materials nor caught short.
  • Make sure all equipment is maintained and workers are trained before they arrive on site.

6. Train Workers to Reduce Costly Accidents and Delays

Accidents and injuries can wreak havoc on your construction budget. Not only will an accident cause costly delays and necessitate rework, but you could find yourself at the receiving end of major fines, lawsuits or higher insurance premiums.

While accidents do happen, many of them can be prevented with proper training. Investing in proper training up front, especially for equipment operators, will help keep your project running safely and smoothly.

• Tip: Ask your equipment rental provider for equipment operator training. High-quality providers often offer training programs to certify equipment operators and help you comply with safety regulations and industry standards.

7. Reduce Change Orders to Stay on Track

Change orders are requests to modify the project after construction has begun. These requests can significantly increase both costs and timelines, because they affect nearly every aspect of a project, from workflow and labor allocation to materials and even equipment rentals.

• Tip: While avoiding change orders entirely would be ideal, in reality, those in the construction industry find over time that change orders are often unavoidable. Make sure you have a clear change order protocol in place. A structured process helps document changes, maintain transparency, protect all parties involved and reduce the risk of costly surprises that can derail your project.

Build a Better Future with Herc Rentals’ Expertise

While you can’t control the future or a changing economy, you can prepare for it by reducing construction costs with a dependable team of experts.

For large-scale projects, you need more than just a simple rental service. You need a provider who understands your industry and offers equipment training, flexible rental terms and on-site support to keep your project on track. We can provide the services and earthmoving and specialty equipment that your project needs.

Explore the industrial project management solutions today, or call 1-800-432-6215 to speak with a Herc Rentals specialist.