Is a downturn coming for the construction industry? Some pundits say yes, and some say not. The construction industry continues to see high inflation, disrupted supply chains, and construction companies struggle to find the talent to complete projects on time and on budget. A closer look at the numbers paints a clearer picture of where we currently are at and where we are headed in construction.
FMI’s North American Engineering and Construction Industry Overview in the first quarter of 2023 gives some interesting takeaways. For one, total construction spending in 2022 was driven primarily by residential building, multifamily, commercial, and manufacturing. But that may look a bit different in the year ahead. The only segments with losses in 2022 were religious, public safety, and power segments.
The organization suggests there are “cracks” projected to come from the residential market, which will be the biggest cause of a 2% decline in construction spending in 2023. Other segments such as nonresidential building and nonbuilding structures are expected to grow in the year ahead, with each area forecasted to jump 8% in 2023.
The latest NRCI (Nonresidential Construction Index) score of 46.4, was nearly flat from the previous quarter’s score of 46.3, suggests ongoing concerns into the first quarter of 2023. The index has remained under 50 for three quarters and indicates fewer future engineering and construction opportunities in 2023. Still, the economic and industry sentiment falling is offset by improving productivity and cost pressures in materials and labor.
The economic uncertainty in 2023 is placed on top of the disruptions of 2022. FMI suggests the top three challenges for their clients include: retaining skilled workers in both the office and the field; creating a cohesive and connected culture to nurture those workers, and combating project delays—which I imagine are often created as a result of those supply-chain slowdowns experienced in nearly every vertical market.
According to a survey conducted in September, 89% of construction professionals experienced owner-led project start delays in 2022. Another 44% saw supply chain-related project delays. Only 8% of those surveyed said they had not experienced any project start delays in 2022.
This is requiring construction companies to refine business discipline and operational execution, focus on culture, make timely decisions, narrow in on core competencies, concentrate on business development, and invest in people, process, and technologies.
This is certainly only the beginning. The construction industry has seen many ups and downs. As Peggy Smedley always says, construction is cyclical by nature, and it weathers the storms that it faces. Still, now is the time for many builders and contractors to put the right processes and technologies in place to prepare for what is to come in the next several months.
Want to tweet about this article? Use hashtags #construction #IoT #sustainability #AI #5G #cloud #edge #futureofwork #infrastructure