The construction market is an interesting one now. From the labor shortage to cost volatility, there is much to consider as we move forward. Let’s consider the current state of the construction to identify how to navigate it in 2024 and beyond.
Currie & Brown suggests there are many challenges in today’s construction market including geopolitical turmoil, inflation, materials and skills shortages, and tightening sustainability regulation, just to name a few. As a result, many of these factors are driving up construction costs globally, with costs rising by 3.64% last year alone.
Certainly, this isn’t a new challenge. In the five years leading up to 2023, we saw global construction costs have risen by 21%. That certainly isn’t easy to keep pace with. But, of course, this is only one of many challenges the industry faces today.
This comes as nonresidential construction begins to fall. According to ABC (Associated Builders and Contractors) analysis of data, spending decreased 0.4% in January, which concluded a 19-month streak of monthly gains. Spending was down in 10 of the 16 nonresidential subcategories.
All of this comes at the same time as the construction industry is facing a labor shortage. The numbers here are astounding. We know the construction industry will need to attract an estimated 501,000 additional workers on top of the normal pace of hiring in 2024 to meet the demand for labor.
Certainly, we need to attract more workers, but are we going about it the right way? ABC has some concerns with Biden’s proposed apprenticeship rule, suggesting it will ultimately discourage apprentices, contractors, and ABC apprenticeship program providers from participating in the government-registered apprenticeship system, as it adds more bureaucracy and paperwork requirements while also eliminates flexible competency-based approaches.
After surveying its members, ABC found 96% of respondents say new recordkeeping and reporting requirements will make them less likely to participate and 94% believe the rule will ultimately increase the cost of participating. All in all, 98% say small businesses are less likely to participate or continue to participate because of the changes.
Certainly, the right recipe of mentorship, training, and reskilling and upskilling will be essential to ensure a successful workforce in the future. Another way to address this is to focus on productivity, which we know often remains low in the construction industry. One report suggests 79% of contractors could improve labor productivity by 6% or more with better management. This requires a myriad of factors. Optimizing labor productivity requires good teamwork, planning, and a little bit of technology.
The bottomline is the construction market is often cyclical and construction companies need to be prepared to ride the waves that come along with this market. Whether the market is up or down, construction companies need to be prepared with the right workers, processes, and technology to ensure the best opportunities for success.
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