Another year, another construction survey and business outlook has been published. Following the construction industry outlook reports we shared back in 2016 and 2017, this new and updated report for 2018 reveals some trends and opportunities that we think our clients in the construction industry should keep their eyes on.
The survey is conducted by the Associated General Contractors of America (AGC) in conjunction with Sage – developer of popular construction accounting software like Sage 100 Contractor and Sage 300 Construction and Real Estate.
In this article, we’ll summarize the most important survey findings and explain what it all means for the construction industry in 2017 and beyond.
General Construction Industry Outlook
Construction firms appear to be very optimistic about 2018, as they expect demand for all types of construction services to continue to expand. This optimism applies to both private- and public-sector construction, perhaps reflecting both optimism with current economic conditions, an increasingly more business-friendly regulatory environment, and optimism that the U.S. government will finally deliver on long-promised infrastructure investments.
Despite the overall optimistic outlook, the construction industry faces a number of significant challenges this year, some of which have carried over and continue from previous years including:
- Continued workforce shortages
- Increased pay and benefits (resulting from smaller labor pool)
- Current lack of new infrastructure investment creating fierce competitive environment
Demand Growth and Market Segment Opportunity
Despite these challenges mentioned earlier, 2018 should prove to be a good year for the construction industry as contractors are expecting that every segment of the construction market will grow.
Based on input from survey respondents, here are some noteworthy sectors mentioned with optimism:
- Private Office Market – 22% net positive
- Retail, Warehouse, and Lodging – 21% net positive
- Water & Sewer and Manufacturing – 20% net positive (for both)
- K-12 School – 18% net positive
- Hospital and Highway – 17% net positive (for both)
Respondents are slightly less optimistic, but still positive, about growing demand in other segments including multifamily residential and public building, power, higher education, and federal construction.
The outlook for construction demand is even more optimistic than it was at the beginning of last year, with a higher net positive reading for almost every market segment (with just a few exceptions).
Adding Staff in Face of Worker Shortages
Three quarters of construction firms report they plan to expand headcount in 2018, up slightly from 73 percent of firms who reported plans to expand headcount in 2017. However even as most firms expect to expand headcount, an overwhelming majority – 82 percent – of firms expect it will either become harder in the face of a continued workforce shortage.
The net result will likely be that firms expand headcount slightly, but take other steps to both keep pace with projects and retain existing workers including increased pay rate, added incentives or bonuses, paying more overtime, and invest more in training programs.
Worries Over Washington
While the biggest concerns are clearly worker shortages and competition for projects, 28% of construction companies also report concerns over growth in federal regulations followed by 24% who report concern that infrastructure investments will see another year of big promises with no delivery.
Contractors Embracing Technology
Many contractors report they are embracing innovations such as Building Information Modeling (BIM), lean construction, mobile technology, and online file sharing. Turning to technology can help alleviate the burden of worker shortages by enabling employees to get more work done in a way that’s faster and more efficient than paper-based processes and systems.
See Also: What is BIM (And Why Should Contractors Care?)
Perhaps because they are looking for ways to be even more efficient amid tight margins and labor shortages, a growing number of contractors appreciate that information technology (IT) needs to be part of their formal business plan. Since we began sharing this industry outlook back in 2016, the number of firms that report having a formalized IT plan in place has been growing steadily from 52% this year, compared with just 42% reporting in 2016.
Mobile and Cloud Technology in Construction
Contractors appear to be more open to moving their data into the cloud, but not without some reservation. When asked which cloud service model they currently use, 57% indicate a hybrid cloud, in which their software and data remain on a private network but can be securely accessed with a web browser – while only 15% say they use software-as-a-service (SaaS) applications that are fully cloud based. Perhaps most telling is that more than half of the survey’s total respondents didn’t answer the question about which cloud service model they use, indicating potential confusion about what the cloud is and the options available.
The need for mobile construction capabilities on the job site continues to drive the largest usage of cloud-based technology. The top ways contractors plan to use mobile software are for daily field reports (67%), accessing customer and job information from the field (63%), employee time tracking and approval (59%), and the sharing of drawings, photos, and documents (59%).
The Bottom Line
Contractors expect 2018 to be an even better year for the construction industry than 2017. There are a number of likely reasons for this optimism, among them, strong overall economic growth, the Trump administration’s efforts to reduce needless regulatory burdens, expectations that pending federal tax cuts will further boost demand, and a sense that technology can help solve long-running challenges such as workforce shortages.
Yet it is also clear that contractors’ optimism is likely based on two key assumptions: that tax cuts will lead to stronger demand and that Washington will finally deliver on its promise to boost investments in infrastructure.
2018 Construction Industry Survey
Get the Full Report
Click below to request a copy of the 2018 Construction Hiring and Business Outlook conducted by Sage and The Associated General Contractors of America (AGC) .
This detailed 13-page report takes a deeper dive into both the opportunities and challenges the construction industry survey respondents expect to experience in 2018 and beyond.