It seems like everywhere you turn sources are buzzing about the current state of the construction market and what the future holds. Projections of commodity cost increases provide an unstable perspective. The reality is that the construction industry has made a significant recovery from the 2020 recession, while also balancing challenges that are expected to persist. 2022 will prove rewarding, but equally challenging, and industry players seem positioned to capture opportunities of growth.
To understand the outlook and perspectives of organizations across the country, Deloitte fielded a survey of more than 500 US executives and other senior leaders in September 2021. The survey captured insights from respondents in five specific industry groups: chemicals and specialty materials, engineering and construction, industrial products, oil and gas, and power and utilities. I turn to their insights to dispel some of the more emotionally driven scare tactics out there.
Some of the top factors to watch closely this year:
- Industry growth
There is no shortage of industry activity. Growth in building permits despite material and labor shortages is evident.
- Supply chain and sourcing disruption likely to affect project delivery and margins
Industry profitability and performance is extremely challenging with unknown factors in projects fluctuating daily.
Deloitte highlights that, “The impact of this crisis is twofold. The first challenge is the lack of materials; per an Associated General Contractors of America (AGC) survey, 75% of E&C firms indicated project delays due to longer lead times or shortage of materials. Further, 57% reported delivery delays, indicating that the industry has difficulty predicting when materials would arrive. The second impact is sharply increased costs; during the first seven months of 2021, the prices of critical construction materials observed double-digit increases every month. Overall, supply chain disruptions and volatility are expected to be among the biggest challenges in 2022, and the firms that can navigate through them will likely emerge as winners.”
- The value of connected construction
Technology is a huge asset in keeping teams connected and reacting to situations in as close to “real time” as possible. Maintaining this critical visibility into project status is a large determinant of what firms are able to function more intelligently given the somewhat crazy conditions of the market.
- Mergers and acquisitions
Each of my closest colleagues in the construction community has found their firm involved in an M&A either this year or last. Teams are joining forces to expand the capabilities of their group and broaden opportunities through the combined relationships of both companies now being one. This uptick in projects will be a positive force in 2022.
- Talent challenges
The skilled labor shortage has been a challenge many have dealt with their entire careers (myself included). The impact of not filling job openings can negatively affect engineering/construction firms in more ways than one, including project delays and cancellations, projects being scaled back, inability to respond to market needs, losing project bids, and failing to innovate, among others.
Attracting solid talent takes creativity, but having a strong strategy to retain, develop and nurture employees is a huge saving grace.
As far as these factors unfolding in the Jersey/PA markets, we have seen that fuel impacts everything dramatically. Fuel gives every commodity permission to inflate, and this can sometimes be confused for the materials themselves rising. Through attention on an early project team collaboration, it’s always been our belief that challenges become more manageable. Even in the crazy climate of 2022, construction teams can thrive with the correct management and oversight.