The U.S. construction industry is among the world’s largest, with annual expenditures of over (US)$1,231 billion. With this annual spending driving the U.S. economy, U.S. construction companies, for example, spend more than (US)$10 trillion in goods and services, employing over 10 million workers. Construction projects are taking place all over the country, making the industry’s outlook a positive one.
This doesn’t mean it’s all clear sailing from here. It isn’t. U.S. construction companies face roadblocks and operational challenges every day, like improving safety and a labor shortage. To stay competitive in 2019, these problems must be beaten, during a period where the industry only has the ability to grow modestly. To stay competitive in 2019, these problems must be beaten, during a period where the industry only has the ability to grow modestly. A rise in interest rates and the U.S. economy may also slow down construction’s future growth.
The top challenges facing the industry include:
- Technology development/integration
- Increasing material costs
- Skilled labor shortage
- Green construction techniques
- Stagnant level of productivity on construction projects
- Improving safety practices/meeting standard compliance.
Construction companies that beat these challenges will grow and prosper in 2019. Anyone who doesn’t will have to struggle to remain competitive.
Below we take a closer look at the problems facing the U.S. construction industry. Reading this year in review report can help you plan the year ahead more effectively.
Overview of the US Construction Industry 2018
The U.S. construction industry continued to expand during the first half of 2018 but still more slowly than 2017. A strong economy and positive market fundamentals for commercial real estate did help to fuel this modest expansion. This was along with an increase in federal and state funding for public works, and institutional buildings.
Briefly, construction saw a big increase in private and public housing—a key driver of this year’s expansion. Private construction costs continued to grow, reaching (US)$899 billion in 2016. Forecasters expect the cost of new construction put in place to reach more than (US)$1 billion by 2021. Meanwhile, a strong demand in the engineering and construction sectors fell, thanks to the collapse of oil prices.
Inflation-adjusted data from the U.S. Bureau of Economics shows that the impact of construction has grown by 21% since 2011, while the industry’s contribution to the U.S. economy reached over $650 billion for the first time since 2008.
Climbing interest rates and higher material prices, however, slowed down expansion during 2018 and may do the same in 2019. However, the industry is still predicted to make a small profit next year, assuming the industry’s supporting forces don’t weaken and limit the number of construction projects.
Some key U.S. construction projects in 2018 included:
- Vista Tower (Chicago)
- SalesForce Tower (San Francisco)
- 6 AM Development (Los Angeles)
- One Vanderbilt (New York)
- Winthrop Square Garage (Boston)
- Comcast Technology Center (Philadelphia)
Challenges the Facing US Construction Industry
Next year, the decrease in growth will increase competition between companies to complete a smaller number of construction projects during 2019. Key challenges will also make things difficult for construction companies, including:
Technology developments and integration
Technology advancements in construction, such as an improvement in contractor management software, project management software, building Information modeling, drones, and aerial photography, are all encouraging the industry to grow. The issue for companies is integrating this technology into operations. In an industry notoriously slow at adopting technology, this is a challenge.
Increasing material costs
The cost of building materials continues to increase worldwide. Some analysts estimate that costs may have risen by as much as 9% over the last year. Materials driving this rise in costs include steel, iron, steel mill products, and softwood lumber. Expect materials costs to continue rising into 2019, due to a decrease in supply and an increase in demand.
Skilled Labor Shortage
More than 250 million open construction jobs exist in the U.S. Construction and news indicates this number won’t fall anytime soon. In fact, it might continue to grow. Labor shortages can slow down the speed of on-site projects, or even stop them dead. Labor shortages also make it harder to encourage new and skilled people to start, while the retirement of an increasing number of baby boomers isn’t helping.
Using Green construction techniques
Into 2019, environmental sustainability will continue to be a hot topic discussed in the US construction industry. Green construction includes techniques like designing buildings so that natural light reaches the middle of buildings, reducing electrical costs, preserving the environment, and using resources efficiently. Companies will need to find ways to reduce building’s carbon footprint, which is easier said than done.
Stagnant productivity levels
According to a recent report by McKinsey & Co., the level of construction productivity has remained frozen for the past 80 years. However, some measurements, have shown a steady decline in productivity since the 1960s. Factors that reduce the level of productivity include poor planning and scheduling, lack of collaboration, communication between stakeholders, idle time, labor shortages, and workplace accidents.
During 2019, construction companies may find it difficult to address these five challenges. However, growing competition and shrinking profit margins makes it imperative that they at least try.
Improving Contractor Safety Practices is also a Challenge
It’s no secret. The US construction industry accounts for a numerous number of worksite accidents each year. In fact, every day, an average of two construction workers die due to work-related injuries in the United States. One in five of all workplace fatalities occurring are construction-related.
Therefore, it is not surprising that the US construction industry faces a high level of scrutiny when it comes to safety issues. This makes the improvement of safety practices a critical challenge for all construction companies. An increasing number of construction companies are making safety their top priority to try and beat these problems.
Fortunately, construction has more resources to fight the safety battle than ever before. Between technology advancements, safety apps (like Initiafy’s Access control), and improved safety equipment (e.g. work boots that connect to Wi-Fi), companies now have the tools to reduce worksite accidents, lower the risks involved, and cut compensation costs.
Boosting Safety Practices with Contractor Management
One safety tool that companies often overlook is contractor management software. Construction projects often employ independent contractors to reduce the costs involved and meet the required deadlines.
Contractor management software, like Initiafy’s, helps managers to create a structured contractor management program, streamlining the whole management process, reducing paperwork, boosting productivity, and reducing the number of onsite accidents, among other things.
This software also helps to make on-site locations a safer place to work, remaining more compliant with rules and regulations. It can even prevent workers lacking the right training or certificates from accessing worksites. This can dramatically reduce the number of accidents at a worksite.
The Bottom Line
Into 2019, the US construction industry will continue to expand. Similar to 2018, the rate is estimated at 3%. With the supporting factors less certain in 2019, the need to overcome critical challenges facing the industry, is even more critical to address.
Improving safety will also remain a vital challenge for construction companies into 2019, especially when it comes to contractor management. With a SaaS software solution like Initiafy’s, it is possible to create a structured contractor management program that makes sense and provides a solid return on investment.
As a cost-effective, customizable solution, Initiafy helps you to beat the safety challenge, which can reduce a company’s profitability level, while increasing its’ level of ability in a highly competitive industry. More importantly, this SaaS solution can help you survive and thrive into 2019 and beyond.