Last year, contrary to early expectations, proved to be a banner year for the construction industry, with growth seen throughout all construction sectors. Non-residential building, for example, was reported by several industry experts to have topped $350 billion in 2015 and is expected to expand even more during 2016. However, not all sectors enjoyed the same level of success, and how they perform with construction growth during the coming year will depend on several factors.
Multifamily Construction Will Prosper in 2016
The boom times experienced by apartment builders in 2015 will continue into 2016 as occupancy rates for apartments top 96 percent and rents continue to rise as the demand forces up prices.
Hospitality Construction Growth Increased Dramatically in 2015. Will That Trend Continue?
About 33.9 million square feet of hospitality properties were completed throughout all the U.S. market last year, comprising 1.12 percent of total stock, shared Randyl Drummer of CoStar. That figure is up more than 25 percent from the inventory delivered during 2014.
Industrial Construction to Grow, But Look Out for Labor Shortages
While the majority of industry experts appear to agree industrial projects will, indeed, experience major growth during the coming year, there are issues that will impact the industry, making it necessary to explore options not previously considered.
A shortage of skilled labor will create issues throughout the industry.
“A significant portion of employees who left the industry during the recession never returned, and companies are still struggling to find workers at all levels to properly staff their teams,” said Emily Peiffer of Construction Dive.
Labor shortages will almost certainly impact the strategies employed by contractors as they work to ensure their projects are completed on time and within budget constraints.
Logistics Will Be a Topic of Discussion Throughout the Year
The fourth trend is, arguably, the most important of the group. With the ongoing labor shortage issues, industry experts are concerned about the direction some construction issues will take during the coming year.
Contractors will be more selective in the projects they take on.
“It’s different from the last boom, when people were signing up for work,” said Chris Kennedy of Suffolk Construction. “Everybody still has those recent wounds. They’re going to be a lot more cautious about growing a firm bigger than they can handle.”
Green building will become increasingly important to construction growth. Commercial construction has led the trend toward incorporating green construction elements, but the residential sector is beginning to catch up. Adopting green strategies is not as simple as it may appear, as obtaining LEED certification can be a complicated process.
Jobsite accidents are on the increase, resulting in additional scrutiny from regulatory agencies. Local as well as federal agencies are stepping up their enforcement actions, as too many accidents are occurring. Many suggest the uptick in accidents is directly related to the shortage of skilled labor.
Obviously, there are other related topics contractors and clients alike should explore when considering a project in the coming year, but these are four that definitely need to be dealt with.
Residential Construction is Also Worth a Mention
While residential construction has not enjoyed quite the resurgence other sectors have experienced, it is gaining momentum.
“The construction industry has benefited from increased stability stemming from low materials prices and greater certainty regarding federal budgeting and monetary policy, although a lack of appropriately skilled labor will remain a challenge for contractors,” said ABC Chief Economist Anirban Basu.
While here, again, labor issues will be a factor, the residential market is expected to improve incrementally over the coming year.
Multifamily, hospitality, and industrial sectors are all likely to see a healthy boost in their outputs throughout 2016. Residential construction growth, although slower to recover, is also expected to improve barring totally unforeseen events. While shortages of skilled labor will certainly impact the industry as a whole, careful planning, paired with targeted labor recruitment activities, should mitigate the issue. The net result is that, in 2016, the industry can be expected to enjoy significant gains over the past few years.