WEDNESDAY, JANUARY 17, 2024
An Associated General Contractors of America survey from the beginning of the year found that construction firms have a mixed outlook for 2024.
According to the GC and Sage, this is in part due to firms predicting transitions in demand for projects, the types of challenges they will face and changes in technology, including artificial intelligence.
“2024 offers a mixed bag for construction contractors: on one hand, demand for many types of projects should continue to expand and firms will continue to invest in the tools they need to be more efficient,” said Stephen E. Sandherr, the association’s Chief Executive Officer.
“Meanwhile, they face significant challenges when it comes to finding workers, coping with rising costs and weathering the impacts of higher interest rates.”
Survey Findings
“A Construction Market in Transition: The 2024 Construction Hiring and Business Outlook” explains that, amid changes, contractors are struggling to cope with significant labor shortages, the impacts of higher interest rates and input costs, and a supply chain that, while better, is still far from normal.
The net reading, or the percentage of respondents who expect the available dollar value of projects to expand compared to the percentage who expect it to shrink, is reportedly positive for 14 of the 17 categories of construction included in the survey.
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An Associated General Contractors of America survey from the beginning of the year found that construction firms have a mixed outlook for 2024. |
However, the association says, a smaller share than previously expects the markets they compete in to expand in the coming year. The net reading decreased from the 2023 survey for nine project types, increased for six types and remained unchanged for two.
The highest net positive reading in the survey was for water and sewer construction at 32%. Power projects and hospital construction fell behind at 25% and 23% net, respectively.
“On balance, contractors remain upbeat about the available dollar value of projects to bid on in 2024. But the optimism regarding opportunities for most project types is less widespread than it was a year ago,” said Ken Simonson, the association’s Chief Economist.
Simonson noted that more than two-thirds (69%) of the respondents expect to add to their headcount, compared to only 10% who expect a decrease. While just under half (47%) of firms expect to increase their headcount by 10% or less, nearly one-quarter anticipate larger increases.
AGC adds that 77% of respondents reported they are having a hard time filling some or all salaried or hourly craft positions. The majority (55%) reportedly expects that hiring will continue to be hard (35%) or will become harder (20%).
That said, most firms report that they took steps in 2023 to attract and retain workers, including 63% who increased base pay rates more than in 2022. Additionally, 25% of firms provided incentives or bonuses and 24% of the firms increased their portion of benefit contributions and/or improved employee benefits.
Meanwhile, as in the past two surveys, nearly two-thirds of respondents say projects have been postponed or canceled. Almost equal percentages of firms report projects were postponed or canceled in 2023 and not rescheduled (36%) as report projects were postponed but rescheduled (37%).
In just the first half of 2024, 10% of respondents have already experienced postponement or cancellation of a project for their schedule.
AGC indicates that only 23% of respondents say they have not had any significant supply-chain problems. However, 64% noted that rising interest rates or financing costs are one of their biggest concerns for 2024, while 63% listed insufficient supply of workers or subcontractors and 62% are worried about the likelihood of an economic slowdown/recession.
In addition, 58% listed rising direct labor costs (pay, benefits, employer taxes), while 56% selected worker quality and 54% in materials costs as major concerns for the year.
Officials with Sage noted that construction firms have been seeking ways of adapting to the shortage of skilled workers and improving jobsite safety and productivity. According to the release, nearly 40% of firms said they will either increase their investment in drones (26%) or make an initial investment (14%).
An anticipated 30% of firms will make an initial investment in artificial intelligence (19%) or increase their investment (11%), while almost 30% plan to make more use of offsite production (21%) or start to (9%).
“Technology has played an instrumental role in helping construction firms build more efficiently while navigating current challenges,” said Dustin Stephens, Vice President of Construction and Real Estate, Sage.
“In this era of digital transformation, technology serves as a cornerstone for sustained growth and success.”
Stephens added that nearly all firms plan to increase or keep level their investment in software.
“We will continue to urge the Biden administration to implement mandated reforms to the federal review and permitting process and otherwise ensure that the federal government no longer serves as the biggest obstacle to its own construction investments,” said Sandherr.
“We are committed to working with policy makers and our members to make sure the conditions are right for firms to be successful in their efforts to improve the nation’s infrastructure, modernize manufacturing and build an even stronger economy.”
The full report findings can be read here.
Tagged categories: Associated General Contractors; Associated General Contractors (AGC); Business conditions; Construction; Economy; Good Technical Practice; Industry News; Labor; Market forecasts; Market trends; Program/Project Management; Projects - Commercial; Supply and demand; Workers
