The construction industry has been significantly affected by COVID-19 and has continually pivoted to adapt to the continuing shocks of COVID-19 variants. There has been a perfect storm of concerns in the construction industry, including the challenges of hiring construction workers, the huge disruption of logistics and supply chain, rising costs, resistance to COVID protocols and recommendations and the continuing uncertainty that surrounds us.
Construction costs are expected to continue to rise until 2022, mainly due to insufficient materials and the availability of labor, which will limit the recovery until at least the first half of 2022. Data from the United States Bureau of Labor Statistics indicate that there has never been a time when so many costs of materials for construction (steel, wood, aluminum) have increased so rapidly simultaneously.
Two persistent challenges that negatively impacted the recovery of the construction industry in 2021 will continue after COVID-19.
Supply chain delays and record costs for several key building materials will continue to strain project completion time and profitability.
The COVID-19 variant will significantly slow economic growth with the potential for future waves of the pandemic causing more distress upon recovery.
Persistent logistics backlogs with continued global production and shipping shutdowns due to the COVID-19 variant will limit the ability of suppliers to catch up with demand. Transport costs will also increase with the resumption of production.
Labor availability will continue to disrupt the post COVID-19 recovery and could be the biggest negative impact on the construction industry and the return to profitability of individual contractors. Unfortunately, the construction labor challenge is expected to worsen next year, leading to increased construction labor costs in 2022.
The big question about the job market is, how are we going to address it after the pandemic? Labor shortage is a global problem for customers due to the concern of not having enough manpower to fulfill contracts. The most difficult construction trades positions to fill are laborers, carpenters and heavy equipment operators. Project managers and construction supervisors are the most difficult to find for full-time positions. The construction industry will continue to struggle to recruit new entrants to the labor market with the required skills after the pandemic.
Rising raw material costs are squeezing already slim margins for construction companies. A strategic approach to address this challenge is needed, such as moving to offsite manufacturing, rather than building onsite. The increased use of new technologies to increase the efficiency of the project execution system is also necessary.
It will be difficult for companies in the construction industry to be confident in their plans for 2022 and beyond with the great uncertainty in a post-pandemic world. And yet, there is a golden opportunity for the construction industry to recover from the crisis caused by COVID. NOW is the time to take an innovative leap forward and tackle the structural issues that have historically held back the construction industry in terms of growth, productivity and profit margins.
Socrates offers great advice for the construction industry regarding recovery from COVID-19:
“The secret to change is to focus all of your energy, not on fighting the old, but on building the new.”
Long-time columnist Glenn Ebersole is a Chartered Professional Engineer and Head of Strategic Business / Marketing Development and a leader in the AEC industry and related fields. He can be reached at [email protected] or 717-575-8572.