Construction Industry Trends: What to Expect in 2018

Construction firms and contractors expect to see continued year-over-year revenue increases in 2018—if they can solve the ongoing labor shortage undercutting their efforts. How tough is it for the builders to fill the roles they need?

In short, the trade workers continue to be in short supply while the demand for new construction remains higher—though perhaps not as high as in years past. Here’s how the numbers shake out:

Nationwide, new construction and infrastructure repair charged ahead in 2017. The sector has seen consecutive years of growth, according to the U.S. Census Bureau: In 2016, total construction spending increased 6.5 percent from the previous year; in 2014 construction spending was up nearly 11 percent and in 2015 we saw a 10.7 percent increase.

Aggressive year-over-year growth drives demand for skilled tradesmen and women, positions that prove at times difficult for construction companies and contracting firms to fill. Construction employment remains 10 percent below peak numbers, according to Ken Simonsen, chief economist with Associate General Contractors (AGC).

Regional labor shortages in the south and western part of the U.S.

The western part of the U.S. is feeling the labor shortage particularly hard. In August, an AGC poll revealed 75 percent of firms in the region reported they struggled to fill construction positions, up from 71 percent in 2016, while roughly 70 percent said they anticipated a larger headcount in the coming year to meet demand.

Breaking the construction labor shortage down by trade, a National Association of Home Builders (NAHB) / Wells Fargo survey shows that framing crew positions experience shortages most often (77 percent of jobs), followed by both rough- and finished-carpenters at 76 percent and 74 percent respectively. Of the 15 trade specializations mentioned in the survey, 11 reported shortages more than 50 percent of the time.

Worth mentioning is that independent subcontractors in particular have been unusually difficult to staff with adequacy. This trend likely has roots in the housing downturn in the late part of last decade.  After a dearth of construction jobs, many in independent trades have since returned to work at construction firms.

Market is less aggressive but still hot in 2018

Construction firms might find some consolation that demand for new housing starts is expected to slow down a touch in 2018—but that’s purely a relative measure, meaning that growth remains on the horizon, but not the double-digit numbers that we’ve seen in years past. Market intelligence from Building Solutions forecasts residential starts seeing a six percent bump year over year. Additionally, “…non-residential should have strong Institutional growth with education and public buildings growing 6%. Commercial is expected to grow 2% with office leading at 6%. Overall, non-residential is predicted to grow 4%. Non-building is also forecasted for 4% growth based on an uptick of 6% in Roads and Bridges.”

On the flip side, it seems apparent that a relatively slower market for new starts doesn’t spell relief for the construction industry. A fearsome storm season last summer left lots of rebuild work for firms to pick up. This creates additional demand for construction labor as areas in Texas, Puerto Rico, and Florida rebuild from hurricanes. The federal government recognizes the difficulty the labor shortage imposes on the effort. “Finding skilled construction workers will be essential to ensure the Gulf region is able to quickly and efficiently rebuild,” U.S. Chamber of Commerce CEO Thomas J. Donahue said in a September press release.  “Our nation must address our workforce challenges to enable the economy to grow.”

In demand: People That Can Find People

We’d expect demands for construction management to reflect the pain points in the vertical—and it does. It isn’t surprising that we are seeing increased demand for project management personnel that can fill gaps in construction labor. As of December, we’ve had more than 1,500 construction management positions posted on the site. This is indicative that firms are gearing up to tackle building demands heading into 2018. Jobs in construction project management command around $100,000 and can be found in nearly every metropolitan area.