Opportunities and Industry Challenges
Sage recently published the results of their 2016 construction industry survey of more than 1,500 contractors and construction professionals. It’s something that Sage, developer of popular construction industry software like Sage 100 Contractor and Sage 300 Construction & Real Estate, has been doing since 2012.
But this year they took a slightly different approach, teaming up with the Associated General Contractors (AGC) of America to combine their annual “construction hiring and business outlook” with Sage’s software and technology insight.
In this article, we’ll summarize the survey findings and explain what it means to the construction industry in 2016 and beyond.
2017 Construction Survey Now Available
While you’re here, we wanted to let you know that the 2017 Construction Survey is complete and the findings are now available on our website. Click below to access the article or request the full report.
General Construction Industry Outlook
In all, contractors are generally optimistic about 2016 and expect that a mix of both public and private sectors will drive demand. Survey respondents were most optimistic about construction opportunity in the following industries:
- Retail, warehouse, and lodging (21% net positive response)
- Hospital (19% positive)
- Private Office (19% positive)
- Multifamily Residential (14% positive)
- Higher Education (13% positive)
While respondents were similarly optimistic about these same categories a year ago, this year they expressed greater optimism than before about the prospects for K-12 schools and public buildings.
On the other hand, contractors are less optimistic in 2016 about other public and private segments including water and sewer, manufacturing, highway, and other transportation.
Additional market segment details are available in the full report (download available below).
Construction Hiring in 2016
71% of construction firms plan to add headcount in 2016. While that sounds great, it’s worth noting that those plans are less ambitious than they were in 2015 when 80% of firms reported plans to increase the size of their workforce. Even still, they key takeaway is that a majority plan to hire. Fortunately, only 6% of respondents reported plans to reduce their total headcount in 2016.
Potential Challenges Including Worker Shortages
A significant factor that appears to be affecting hiring plans is a continued shortage of qualified and available workers including salaried and craft professionals. According to one survey respondent, “Experienced workers are getting harder and harder to come by with baby boomers retiring …” Most firms predict that labor conditions will remain tight, or even worsen, over the next 12 months.
What to do?
Many firms report they are increasing pay or benefits to retain or recruit qualified staff as a result of these shortages.
- 49% have increased base pay rates
- 30% are providing bonuses and/or other incentives
- 23% are increasing contributions to employee benefits
Labor shortages along with the steps that companies are taking to address the challenges were very similar to the 2015 outlook. In other words after 12 months of increasing pay and other benefits, contractors remain as worried about labor shortages as they were a year ago.
In addition to concerns over worker quality and labor shortages, contractors also cited worries about increased competition for winning jobs as well as continued expansion of regulatory burdens at the federal, state, AND local levels.
Contractors Increasing Investment in Technology
The 2016 survey revealed that contractors are more likely to increase their investment in information technology (IT) than in years past. With an industry that’s faced with labor shortages, it’s not surprising that contractors are looking to technology that can help them improve productivity, become more efficient, and do more with their current staff.
Investment will continue in core business systems such as accounting (25 percent of respondents), estimating (22 percent), project management (21 percent), document management (20 percent), and scheduling (19 percent).
The survey also revealed that the construction industry is beginning to embrace cloud technology. Back in 2012, 45% of survey respondents were unfamiliar with “the cloud.” But the 2016 survey shows that is no longer the case with now 60% that either already use, or plan to use, software and technology that runs in the cloud and offers mobile access to workers in the field.
It’s also worth noting that more construction firms are using collaboration technology like document sharing applications, online bid management software, and building information modeling (BIM).
The Bottom Line
Contractors are expecting 2016 to be a mostly positive year for the construction industry. Construction spending continues to expand at rates not seen since the economic downturn nearly a decade ago. Most firms expect key segments to expand or at least remain stable.
Yet enthusiasm is tempered by labor shortages that might limit their upside potential along with the increasing operational costs of compliance with federal, state, and local regulations.
These challenges are real, but they are not insurmountable. Most contractors are discovering that technology designed specifically for the construction industry is helping them leverage their existing workforce more effectively and tackling regulatory compliance and reporting more efficiently so they are minimally disruptive to the business.
2016 Construction Industry Survey
Get the Full Report
Click below to request a copy of the 2016 Construction Hiring an Business Outlook conducted by Sage and The Associated General Contractors of America (AGC) .
This report takes a deeper dive into both the opportunities and challenges the construction industry faces, including workforce shortages, regulation and compliance, and rising health care costs.