A recent construction industry updates report from the Dodge Construction Network revealed that many civil construction contractors are highly optimistic concerning their workload for the rest of 2021 and 2022.
This report surveyed contractors, engineers, and owners and showed that contractors are concerned about material costs over the next six months, with 92 percent of contractors already having projects impacted by the fluctuation in prices and supply chain challenges. However, regardless of these worries, over half still expect to see revenue increases, and 63 percent are predicting their profit margins will hold steady or grow in the next year.
This optimism is in part due to the elevated demand for construction services. This high demand is helping to offset the price fluctuations for companies. While in 2020, the industry hit a 26 year low on the Architecture Billings Index, construction industry updates have been drifting upwards positively since March, indicating an upturn in building construction by early 2022.
Companies are also taking on more work than they have labor to complete. In this quarter alone, backlogs have increased to 40 percent when compared to 25 percent of last quarter. 60 percent of contractors say their need to hire skilled workers within the next three months is high, and 81 percent believe they will have to pay a high price for skilled laborers.
In addition to material costs increasing and the lack of skilled workers, supply chain bottlenecks are also causing disruptions to the sector. These challenges do pose risks, but they are not insurmountable.
Even ITR Economics forecasts a high single-digit growth rate for non-residential construction next year. This comes after looking at several key indicating factors like non-residential construction starts, corporate profitability, end-use segment trends and others. While they clarify that this recovery is not going to magically occur on Jan. 1 of 2022, recovery will happen. The rest of 2021 will be left to slow the bleeding and balance back out, with things getting better in the new year.
This optimism relies on an improvement in the rate of new construction contracts and the resumption of any projects that might have had to be put on hold due to the pandemic and in the aftermath.
Other factors that could increase productivity and aid in the recovery process are implementing a robust, ongoing training program for current employees and new workers and adopting new technological advances. These opportunities for upskilling employees can be utilized so that employees learn a variety of skills and help mitigate the worker shortage. Plus, if more workers under 30 are brought in, they can help with the adoption of new technology like equipment tagging. New technology can help increase productivity and increase profits.
In sum, while construction activity may still be lagging in comparison to other sectors, there are positive construction industry updates and high optimism for the coming months and new year.
As we head closer to 2022, and you realize that your construction company needs more equipment to keep up with job demands, contact a member of our team for equipment financing. We’re here to help and support you in any way we can.