Throughout the first half of 2017 the construction industry demonstrated stability in the face of adversity, with private construction investment leading the way. Despite uncertainty, building continues towards sustainable growth. Growing materials costs and dwindling talent pools are leaving construction leaders grappling with serious challenges. Three of the challenges are outlined below. For more, check out JLL’s latest U.S. Construction Outlook.
Ongoing construction labor shortage
The construction labor shortage is nothing new to industry insiders with the lack of skilled workers in the U.S. taking its toll on project budgets, timelines (and contractors sanity). Reaching historic lows, unemployment in the construction industry sits at 5.3 percent while hourly wages continue to grow and outpace inflation. Good news may be on the way as early stage government policy has devoted increased spending on skilled labor training programs. Many are hoping that some of the additional resources will make its way to the construction industry.
The rising costs of building materials
Over the last 12 years, materials costs have grown by nearly 30 percent. As an example, $500,000 worth of materials in 2005 would cost almost $650,000 today. Additionally, ten percent of those costs have grown in the last five years. In the second quarter of 2017, cement, steel and lumber all had cost increases greater than four percent. This begs the question, when will cost increases slow? With continue construction demand for materials and unknowns surrounding potential tariffs and international import changes, we can only wait and see.
The worries of overbuilding
Coming out of the great recession, the U.S. has seen steady quarter-over-quarter economic growth for the last several years. The commercial real estate and development industry has seen growth of its own, with construction pipelines continuing to expand today. But after years of positive growth, many are beginning to wonder — when’s the next slowdown? More over, what should companies do about it?
Read more about trends in the construction industry and opportunities these challenges present in the 2017 U.S. Construction Outlook from JLL.