Contractors Anticipate Increased Demand As They Cope With Higher Costs And Labor Shortages

The construction industry expects increasing demand for most types of projects in 2022, according to a survey by the Associated General Contractors of America and Sage. They also expect to try to hire more workers to meet the demand. 

At the same time, the problems associated with the coronavirus pandemic, including supply chain issues and labor shortages, aren't expected to go away. Supply chain problems will make it hard to budget for and procure construction materials while worker shortages remain severe enough to make it difficult for contractors to keep pace with demand.

Local markets are likewise reporting similar challenges. In Houston, a separate survey by Kirksey found that contractors are expecting material prices to continue to rise 3% to 8% during 2022. Scheduling delays are expected as well.

In Atlanta, developers faced shortages in roofing materials, concrete, screws and electrical switches in 2021, Transwestern Development Co. partner Greg Boler told Bisnow early in January.

"We're still technically in this pandemic,” Boler said. “Again, a lot of that is out of our control.”

In 15 of the 17 categories of projects included in the AGC survey, respondents are expecting expansion this year. The survey results came from more than 1,000 general contractors in all 50 states, answering questions about their hiring, workforce and technology plans.

Contractors are most optimistic about the market for highway and bridge construction, with 57% expecting expansion. Other kinds of projects that will see expanding demand include transit, rail and airport projects (51%), as well as water and sewer projects (50%). Those segments will be supported by federal investments authorized last year in the infrastructure bill.

In the private sector, contractors expect higher demand for warehouses and logistics facilities, but also healthcare facilities, including clinics, testing facilities and medical labs. 

Far fewer expect any expansion of demand in lodging (only 6%), and the respondents expect a contraction in the demand for retail and office structures, the only two categories for which that is the case.

Eighty-three percent of the respondents said they are having a hard time filling some or all salaried or hourly craft positions, compared to only 8% who say they are having no difficulty. Three-fourths of respondents say it will continue to be hard to hire or will become harder to hire this year.

Eighty-four percent of respondents report costs have been higher than anticipated, while 72% say projects have taken longer than anticipated because of the pandemic. Forty-six percent of contractors report delaying a project in 2021 that was later rescheduled, while 32% had a project canceled altogether. 

“The last two years have become increasingly unpredictable, due in large part to the coronavirus and public officials’ varied reactions to it,” AGC Chief Economist Ken Simonson said in a statement. “But assuming current trends hold, 2022 should be a relatively strong year for the construction industry.”