There are two really important questions the commercial construction industry needs to answer right now: where exactly are we today and where are we headed in the future? A few reports answer the former, and I will address the latter.
At the end of last year, the U.S. Chamber of Commerce suggested commercial construction recovery has stalled—due to not being able to find workers or materials, all amid rising costs. The Commercial Construction Index is down one point in the final quarter of last year. Here is what a bit scary: Contractors’ revenue expectations fell for the first time since the start of the pandemic, down three points.
Perhaps this goes without saying but one of the biggest problems is lack of talent, with 91% of contractors reporting difficulty finding workers. This has led to nearly half of these contractors turning down work because they can’t find enough skilled workers. My hunch is this problem has been exasperated in the early days of 2022, as Omicron is running rampant around the world, and causing many to stay home. (I can personally attest to this fact as we attempt to construct the Living Lab. Many of the tradespeople have missed work in the early stages of the build due to COVID.)
But the worker shortage isn’t the only challenge commercial contractors are facing today. A whopping 95% of contractors are experiencing at least one product shortage, which is up two points from the previous quarter. The slowdowns in the supply chain are naturally impacting every industry. In construction, steel remains the largest shortage, followed by roofing materials, and wood and lumber.
Shortages are one thing, rising prices are another. Nearly all contractors have indicated cost fluctuations have a moderate-to-high impact on their business, which is up 23 points year over year. Additionally, trade and tariffs are still a concern as well, with nearly half of contractors saying steel and aluminum tariffs will have a high or very high degree of impact on their business in the next three years. The same can be said about new construction material and equipment tariffs.
At the same time, much is changing in the AEC (architecture, engineering, and construction) industry in recent days. AEC Advisors points to four big trends to watch that I want to build on.
For one, the AEC industry will play a big part in rebuilding and modernizing the U.S. public infrastructure. At the same time, the industry is more rapidly embracing digital transformation. Third, environmental services are fundamentally embedded in the industry. Finally, we will see an energy transition to renewables and electrification of everything, with the rise in decarbonization, and a considerable opportunity for greener alternatives as 60% of electricity in the U.S. is still coming from fossil fuels.
At the beginning of this decade, I declared it the decade of sustainability. Every individual and every industry needs to step up to help reduce climate change. We need to take steps to reduce pollution and innovate in our cities and our infrastructure. The time is now, whether you believe it or not.
We need to look ahead. There is a real opportunity to tap into technology to solve many of these problems. We can leverage innovative methods and technologies to collaborate on our most pressing issues. The bottomline is this: Even with some indicators down, and some big challenges rising, the future is still bright.
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