Construction outlook is promising
A national contractors association has released its construction forecasts for 2016, and while the industry outlook is generally positive, there are some potential threats looming.
The Associated General Contractors of America has released its construction outlook survey results, which include 1,580 responses from across the nation. Michigan’s results were from 65 respondents who identified Michigan as their largest place of work.
Generally, the outlook is good, with 71 percent of companies indicating they will expand headcounts based on growth in the private and public segments.
“The construction industry will continue to recover in 2016 as many firms add to their headcount amid growing demand in a range of private and public sector markets,” said Stephen E. Sandherr, AGC’s CEO. “The industry also faces a number of challenges that have the potential to dampen, and possibly even undermine, the sector’s recovery.”
In dollar amount of work projects in 2015, 31 percent of the respondents performed $10 million or less of work. The next highest range was the $10.1 million-to-$30 million range, where 29 percent of respondents fell. The rest of the respondents fell in between $30 million and the 5 percent who performed more than $500 million worth of work.
The survey found that 50 percent of respondents had between 50 and 249 employees in 2015, and 50 percent use union workers for all projects.
Contractors expect an increase in several areas of work in 2016, including a 38 percent increase in hospital projects, 21 percent increase in public buildings and 19 percent increase in overall projects.
Only two segments are expected to decrease: power and federal projects.
With the overall expectation of increasing workload, 47 percent of respondents expect to increase their headcount by five people or fewer. Just 6 percent expect a decrease in headcount, and 9 percent expects to increase staff by more than 25.
According to the survey, 34 percent of firms are having a hard time filling both salaried and craft worker positions. Twenty-two percent said, “I am having no trouble filling any positions,” and 16 percent said no hiring.
Forty-one percent of respondents said it will become harder to find and hire qualified construction professionals.
Pay increases are expected, with 59 percent either having a higher base pay or expecting an increase in pay or benefits in the future. Another 22 percent plan to provide incentives and bonuses and 9 percent will pay more overtime.
Training and development investment also will rise, with 42 percent expecting an increase.
Chief concerns among contractors in Michigan include worker shortages (57 percent), worker quality (43 percent), rising labor costs (37 percent) and rising material costs (37 percent).
Nationally, contractors are expecting a 34 percent increase in all projects, with retail and warehousing leading the way with 21 percent. Hospital and private office projects both are expected to grow 19 percent.
Most contractors — 63 percent — expect their worker headcount to increase up to 25 percent.
Worker shortage is a national issue as well, with 39 percent of national respondents having a hard time filling salaried and craft worker positions. Twelve percent of respondents are not considering increases in pay or benefits, with 88 percent already or expecting to increase pay and benefits.
Chief concerns for the nation’s contractors are worker shortages, worker quality, rising direct labor costs, growth in federal regulations and increased competition for projects, which all saw more than 35 percent of respondents identify.
“What is particularly striking about the findings on worker shortages is that they are consistent with the responses from last year’s outlook,” AGC Chief Economist Ken Simonson said. “In other words, after a year of raising pay and increasing benefits, contractors remain as worried about the lack of qualified workers as they were at the beginning of 2015.”
Another major survey topic was companies’ IT investments.
Formal IT plans are in place for 42 percent of companies nationwide, with 11 percent expecting to implement a plan in 2016.
Cloud-based software is growing in the industry as well, with 59 percent of firms using or planning to use the technology in 2016.
More than 70 percent of companies already use file sharing sites to collaborate with owners, subcontractors and partners, including 40 percent using “sophisticated” tools.
“Technology is making it easier for firms to operate and succeed in today’s competitive marketplace,” said Jon Witty, Sage Construction and Real Estate vice president and general manager. “We are seeing continued growth in the adoption of mobile technology and collaboration software and a continued move to the cloud, all done with an increasing focus on security.”