Success in the construction industry requires the ability to cost-effectively create a building structure and support system, including systems such as electrical, plumbing, or HVAC. It also requires sharp project management skills to ensure labor, materials, supplies, and equipment are properly scheduled and managed. Therefore, management needs to be aware of trends and issues impacting the industry and develop a plan to address them beyond the day-to-day.
A recently issued report by the Associated General Contractors of America (AGC), 2022 Construction Outlook Survey – Midwest Results, offers this important information. The study surveyed over 1,000 industry companies to uncover critical challenges and issues for 2022. We have provided a summary of key information below.
ARE YOU AWARE OF THESE FORECASTED CONSTRUCTION INDUSTRY TRENDS?
ABOUT THE SURVEY
A total of 177 Midwest construction companies, including general contractors, subcontractors, suppliers, and service providers, participated in the survey. The revenues ranged across the board, from less than $50 million to more than $500 million, with 58 percent of respondents reporting revenue of $50 million or less and 35 percent reporting revenue between $50.1 million and $500 million. The total number of employees varied as well, with 40 percent reporting between 20 – 99 employees and 10 percent reporting 500 or more.
- 2022 Outlook: Contractors are, overall, very optimistic about the outlook for 2022. One of the biggest reasons for this optimism is the federal government’s commitment to increase investment in infrastructure. They expect demand for most types of projects to increase and, as a result, most construction companies plan to add staff.
- Top Concerns in 2022: The industry has several concerns going into 2022, but the most pressing is the increase in material costs. A majority of firms, 60 percent, have turned to alternative suppliers and 49 percent have specified using alternative materials. All respondents indicated that the rise of indirect labor costs (such as recruiting and retention) is a top concern. The other main concerns were supply chain disruptions (80 percent), worker shortages (76 percent), and the rise of direct labor costs, such as wages and benefits (62 percent). Other concerns mentioned include federal and state regulations, worker quality, and increased competition.
- Construction Technology: Many construction companies are turning to technology tools to drive efficiencies and help offset industry setbacks. Companies are becoming more strategic about information technology as they try to remain competitive in the current environment. The majority of firms, 65 percent, indicate they currently have a formal IT plan that supports business objectives. The most popular technology investments include:
- Document management software
- Estimating technology
- Fleet tracking
- Project & asset management software
- Accounting software
- Current Hiring Conditions: The need for qualified and well-trained labor has been a consistent theme in the construction industry for years. According to the survey, 83 percent of respondents are having a tough time filling open positions. With nearly 74 percent of firms expected to increase their overall headcount during 2022, the question is, where will these new employees come from? Most companies plan to raise wages and cover benefit costs to attract and retain employees.
“Contractors are, overall, very optimistic about the outlook for the construction industry in 2022,” said Stephen E. Sandherr, AGC chief executive officer. “While contractors face challenges this year, most of those will be centered on the need to keep pace with growing demand for construction projects.”
If you have questions about the survey and its findings or need assistance with a construction tax, accounting, or audit issue, we can help.