Deepening Labor Struggle Driving Future of Construction

The construction labor shortage continues to deepen nationally, evident by a historically low unemployment rate of 4.5 percent. There has been minimal growth in the workforce over the last nine months, with no sign of an increase. Because of this, industry professionals can expect project timelines to be extended, wages to increase at a faster rate and all eyes focused on construction technology to offset these challenges.

Despite this, the industry continued to hit a mature stage of economic expansion in the third quarter, according to a new report from JLL that tracks national construction trends. Construction spending was up 1.9 percent over 2016 levels and contractor and subcontractor work was also up 1.4 percent year-over-year.

“The construction industry remains strong, but the volume of incoming workers has come close to a halt,” said Todd Burns, president, JLL Project and Development Services. “There are new technologies within reach that will improve productivity, enhance worker safety and create higher quality buildings for the future.”

Construction technology, a bright spot for the industry

A variety of new construction technologies have emerged over the last two years, but adoption has been low. However, there are substantial innovative changes that could have a profound impact to efficiency and productivity in 2018 and further into the future.

1. Building Information Modeling: BIM is the facilitator and enabler for which many technologies are based. 3-D printing, cloud-based collaboration, robotics and artificial intelligence all stem from a central BIM platform.
2. Artificial intelligence and big data: Gathering, storing and analyzing large sets of data have become increasingly easier and cheaper over the last several years. Big data and AI is already being used to drive autonomous equipment, track and optimize worker positioning and schedule materials delivery – all working toward more efficient and timely jobsites.
3. Prefabrication and offsite construction: General contractors are turning to prefabrication and offsite construction facilities that allow them to create building product with semi-skilled labor in a weather-controlled, safe manufacturing atmosphere. Prefabrication facilities have the capabilities to tackle everything from individual walls, to fully built bathrooms and offices offsite.

What does the future hold for the construction industry?

As a whole, the U.S. economy has seen consistently strong growth over the past eight years, demonstrating that commercial real estate does not require rapid economic growth to perform well. If the economy continues to follow its present trajectory, growth will continue for the next 12-18 months.

Although topline construction spending is still increasing, consecutive quarters over past years show smaller and smaller gains, pointing to a tapering growth curve. And while the volume of new ground breaks for large-scale private projects have begun to scale back due to the long-term nature of the timelines, renovation and fit-out work demonstrate continued strength, which will prevail into the next several quarters and beyond.

“Lenders are seeing less interest in large-scale development loans as developers begin to look more cautiously at the future,” said Mason Mularoni, senior research analyst, JLL Project and Development Services. “Available prime development sites across major U.S. cities also continue to decline, which has developers setting their sights on adaptive reuse and innovative renovation projects, which they can bring to the market quicker with less upfront capital spend.”