Stratus recently surveyed 144 construction executives across the mechanical, electrical, plumbing and sheet metal trades to understand where the MEP industry really stands-not where vendors say it stands, not where the conference keynotes suggest it stands, but where the people running these businesses and building these projects actually are today.
The results are published in the 2025 State of MEP Annual Report, and while the full findings span fabrication trends, automation adoption, software maturity, metrics and KPIs, and workforce dynamics, three themes stand out clearly:
The Bigs Are Getting Bigger, and the Gap Is Widening
This is the trend that should make every mid-market contractor pay attention. As mega projects such as data centers, semiconductor fabs, healthcare campuses and energy plants make up an increasing share of the construction pipeline, the large multi-trade MEP firms capable of taking on this work are disproportionately benefiting.
The data backs it up. The survey found that contractors above $250M in revenue reported a median revenue increase of +14.5%, ten percentage points above the overall industry median of +4.5%. Firms with 500+ employees also showed +14.5% headcount growth, while smaller firms held flat. And it’s not just revenue—larger companies had larger fabrication footprints, higher prefabrication rates and more mature digital workflows than their smaller counterparts.
What’s creating this gap? Scale, certainly. But it’s more than that. The large firms have invested in planning systems, BIM infrastructure and fabrication capacity that let them take on complex, multi-system scopes.
They’ve built the preconstruction, fabrication and field execution muscles that mega projects demand. And, increasingly, owners are consolidating MEP scopes under fewer, more capable contractors by rewarding the firms that can self-perform across trades with connected workflows from design through installation.
For contractors in the $50–250M range, the takeaway isn’t to panic, it’s to recognize that the competitive bar is moving. The firms pulling ahead aren’t winning because they’re bigger. They’re winning because they operate like connected enterprises, not collections of disconnected departments. That’s a gap any contractor can close with the right strategy.
Prefabrication Has Become a Growth Strategy, Not Just a Production Tactic
For years, prefabrication has been talked about as a way to save time on the jobsite. And that’s true, but the 2025 data tells a bigger story. Prefab is increasingly being used as a strategic hedge against the two biggest risks in the industry: material cost volatility and labor scarcity.
Start with materials. The survey found that the median material cost increase over the past year was +8%—outpacing labor inflation, which came in at +2.5% at the median.
For the first time, uncertainty in material pricing has overtaken shortages as the industry’s primary cost risk, driven by tariffs, freight variability and supply inconsistencies. Prefabrication helps contractors control that variability by enabling earlier, more predictable procurement tied directly to digital models, a tightly controlled waste environment, optimized use of automating tooling and coordinated production schedules.
Then there’s labor. Over 50% of respondents reported that labor availability worsened in 2025 compared to 2024, with the South and Midwest hit hardest. With hiring increasingly difficult, contractors are turning to prefabrication to increase output without proportional increases in headcount. Moving work from the field to a controlled shop environment with automated equipment means fewer workers can produce more, with higher quality and less rework.
And here’s the performance kicker: Firms with over 60% prefabrication rates reported a +14.5% median revenue increase, compared to +4.5% for the industry overall. The industry’s median prefab rate sits at around 30%, but ranges widely—from 9.5% in electrical to 29.5% in piping and 19.5% in sheet metal. The variation reflects trade-specific constraints, but also a massive opportunity.
When contractors planning to expand prefab were asked what would enable that growth, the top answers weren’t about equipment, they were about adding dedicated prefab planners, standardizing design components and strengthening cross-team collaboration.
In other words, prefab growth is a people-and-process problem, not a capital expenditure problem. The contractors who get that distinction are the ones scaling fastest.
MEP Contractors Need Manufacturing Metrics—Not Just Financial Ones
MEP contractors have increasingly adopted a production system methodology—a connected workflow that runs from BIM to fabrication to logistics to field installation. When it works well, it looks a lot more like manufacturing than traditional construction. But here’s the problem: The metrics most firms use to run their businesses haven’t kept up with that evolution.
The survey found that 75% of contractors track project profitability and 89% track project profit versus estimate. Financial measurement is strong. But when you look at the operational metrics that actually drive those financial outcomes, the numbers drop off a cliff. Less than 30% of firms track VDC productivity or material logistics cycle time. Only 21% track on-time material and fabrication delivery rates on all projects. Material flow from shop to field—the logistics handoff that determines whether field crews are productive or waiting—is the least instrumented workflow in the entire industry. Most contractors know how a project ended financially, but can’t tell you why. They can’t see the cycle times, throughput rates, delivery accuracy or utilization data that would explain the variance between a good project and a bad one, or which systems and processes make money vs. lose money (eg. When is it better to use welded joints vs. grooved joints on a piping system). It’s like running a factory and only measuring revenue without tracking defect rates, production speed or on-time delivery.
The firms that are getting this right—the ones investing in operational KPIs—report better forecasting, improved billing cadence, higher schedule predictability and stronger margin control. As one respondent put it, integrating their VDC model with their estimate and ERP gave them a daily measure of gain and loss that was nearly impossible to track just a few years ago.
Heading into 2026, 68% of respondents said they plan to increase investment in tracking shop and operational metrics. The contractors who will lead the next five years are the ones who stop managing by financial rearview mirror and start operating with real-time production data—from the BIM model through the shop floor to the installed product in the field.
The Bottom Line
The MEP industry is at an inflection point. The firms pulling ahead aren’t just bigger or better funded, they’re more connected. They treat fabrication as a coordination hub, not a production silo. They use prefabrication as a strategic lever, not just a time-saving tactic. And they’re building the data infrastructure to measure and optimize their operations the way manufacturers have for decades. This is called data-driven contracting—the idea that when you connect every workflow from design through installation and give contractors real-time visibility into what’s actually happening across their operations, you don’t just improve efficiency, but fundamentally change how decisions get made, how risks get managed and how profitability gets built.
The data from 144 industry leaders confirms the direction. The question for every MEP contractor now is: How fast are you willing to move?
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Jake Olsen is the CEO of Stratus (www.stratus.build), a connected fabrication platform built for MEP contractors. The full 2025 State of MEP Annual Report is available at stratus.build.
