Despite lingering challenges from a Global pandemic and skilled labor shortages, the commercial construction industry still posted growth in 2022. With the Fed raising interest rates to curb inflation along with other challenges that are likely to impact schedules and profit margins, there are both positive and negative trends that have been forecast as we head into 2023.
What to Look Forward to in 2023 – for Better or for Worse
Not all trends are positive ones. On that note, let’s look at some of the good and bad things contractors should be on the lookout for as we end 2022 and begin the 2023 calendar year.
According to CBRE, construction costs are expected to post their single-largest increase in years due to supply and demand challenges. Specifically, CBRE suggests that prices will increase by more than 14 percent by the end of 2022 and hang tight into 2023 and perhaps even 2024 before decreasing. This gain is the largest year-over-year increase since CBRE began tracking material costs in 2007.
Part of this increase is largely tied to the boom in current commercial construction and the struggle for suppliers to keep up with supply demand. It’s already evident in concrete shortages throughout the nation. Demand for concrete in commercial construction is high and suppliers are having a difficult time keeping up. As a result, deliveries are coming in late, and projects are getting delayed.
Workforce Challenges Persist
We’ll tick off another negative trend before we get into some of the happier ones – though the challenge of staffing projects with skilled tradesmen and women isn’t exactly a new one. With an increase in expected projects thanks to the recently passed Infrastructure Investment and Jobs Act, it’s estimated that the industry as a whole is going to add about 650,000 more workers to sustain the expected uptick in projects. That’s a tall ask – and it’s going to fall on firms to establish robust workforce development and recruitment strategies to ensure they can staff the projects that they’ve been awarded.
Firms Will Look for More Ways to Enhance Efficiency
In a perfect world, projects are completed on time and on budget. However, with so much disruption still in the supply chain and with staffing challenges threatening to put projects behind schedule, firms should be looking for ways to pick up some of the slack. Investing in more efficient technologies and building practices is one way to do it.
One strategy is incorporating modular construction and emphasizing prefabrication. In these practices, parts of a building are constructed off-site in a fabrication shop and then shipped to the site, where they can be integrated into the building assembly. These practices can save time and make for a safer overall environment.
There are various other ways to enhance efficiency on the job site. Investing in robotics and automation can help complement or even fully replace certain human tasks. Doubling down on VDC is another strategy that can help accelerate the timeline.
Housing is Going to Get Hot
One trend that continued to worsen during the COVID-19 pandemic is the housing crisis. It’s estimated that the United States has a deficit of nearly 4 million homes – and the biggest demand is low-income housing. As a result, there are likely to be major opportunities for commercial construction firms that are able to build multi-residential housing units and complexes.
Other markets to keep an eye on include the aforementioned infrastructure market thanks to the passage of the Infrastructure Investment and Jobs Act. Renewable energy work – such as wind farms, solar farms, and natural gas energy plants – is also likely to see an uptick as the United States aims to be a leader in green energy and lead the fight against climate change.
Contact ACE Consulting Today
For more information on some of the top commercial construction trends to be mindful of in 2023 and beyond, contact ACE Consulting today.