Construction contractors nationwide expect increasing demand for numerous types of projects in 2022 despite ongoing supply chain and labor challenges, according to the results of a survey released by the Associated General Contractors of America and construction software provider Sage.
Among the findings in the report titled “Expecting Growth While Coping with the Lingering Impacts of the Pandemic: The 2022 Construction Hiring & Business Outlook,” most firms plan to add workers this year. The report includes state-specific predictions, including for Michigan.
Contractors point to the bipartisan infrastructure bill and broad-based private sector demand for the optimistic outlook. Dark clouds appear in the retail and office construction segments and the ability to find workers.
“Contractors are, overall, very optimistic about the outlook for the construction industry in 2022,” says Stephen E. Sandherr, CEO of the association. “While contractors face challenges this year, most of those will be centered on the need to keep pace with growing demand for construction projects.”
The percentage of respondents who expect a market segment to expand exceeds the percentage who expect it to contract in 15 of the 17 survey categories. Contractors are most optimistic about the market for highway and bridge construction. They are similarly optimistic about transit, rail, and airports projects, as well as water and sewer projects.
These segments all stand to see increased federal investments because of the recently passed bipartisan infrastructure bill. Contractors also are upbeat about demand for federal construction projects and power construction.
The highest expectations among predominantly private-sector categories are for warehouses and other health care facilities, which includes clinics, testing facilities, and medical labs. The outlook for hospital construction is also strong.
Contractors also were optimistic about multifamily residential construction and manufacturing construction. Expectations were more subdued, however, for public buildings; kindergarten through 12th grade school construction; higher education facilities; and lodging.
Optimism about growing demand for many types of construction projects is leading many firms to plan to hire workers this year. Seventy-four percent of respondents expect their firms will expand headcount in 2022, compared to just 9 percent that who expect a decrease. Forty-seven percent of firms expect to increase their headcount by 10 percent or less. However, 22 percent say their headcount will grow by 11 to 25 percent and 5 percent anticipate an increase of more than 25 percent.
Adding those workers, however, will be a challenge. Eighty-three percent report they are having a hard time filling some or all salaried or hourly craft positions, compared to only 8 percent who say they are having no difficulty. And three-fourths of respondents say it will continue to be hard to hire or will become harder to hire this year.
The pandemic continues to impact the construction industry, association officials noted. Eighty-four percent of respondents report costs have been higher than anticipated, while 72 percent say projects have taken longer than anticipated because of the pandemic. As a result, 69 percent have put higher prices into bids or contracts, while 44 percent have specified longer completion times.
Supply chain bottlenecks are also impacting construction. Only 10 percent of firms report they have not had any significant supply chain problems. Sixty-one percent have turned to alternative suppliers for materials and 48 percent have specified alternative materials or products.
Rising construction costs and slowing schedules have contributed to a significant number of project delays and cancellations. Forty-six percent of contractors report having a project delayed in 2021 but rescheduled, while 32 percent had a project postponed or canceled that has not been rescheduled.
“The last two years have become increasingly unpredictable, due in large part to the coronavirus and public officials’ varied reactions to it,” says Ken Simonson, chief economist for the association. “But, assuming current trends hold, 2022 should be a relatively strong year for the construction industry.”
Officials with Sage noted that firms are being more strategic about information technology as they try to remain competitive in the current environment. Sixty-one percent of contractors indicate they currently have a formal IT plan that supports business objectives. An additional 7 percent plan to create a formal plan in 2022.
“Amid the challenges the industry faces, technology plays an essential role in keeping teams connected and projects moving,” says Dustin Stephens, vice president of construction and real estate at Sage. “The past few years have highlighted just how crucial mobile and cloud-based solutions are, and we will continue to see these technologies play an integral role in helping construction firms bounce back.”
Stephens adds that most firms plan to keep their technology investment about the same as last year. When asked whether they planned to increase or decrease investment or stay the same in 15 different types of technologies, the majority of respondents — ranging between 69 and 89 percent — said their investments would remain the same.
Association officials urged public officials to take steps to help the industry recover in 2022 and avoid measures that will undermine the sector. They noted that the Biden administration’s vaccine mandates will prompt many vaccine-hesitant workers to leave the relatively few employers covered by the orders and move to smaller firms that are not covered by the rule and employ over 60 percent of the industry’s workforce.
“Given how many firms are currently looking to hire, many vaccine-hesitant workers will be able to switch jobs instead of taking a shot they have already resisted for over a year,” Sandherr says. He added that the administration’s plans to increase tariffs on Canadian lumber and maintain existing ones on other key construction materials will make it harder for firms to accurately bid upcoming projects and complete them on schedule.
Sandherr says the association will continue to push for new federal investments in workforce development and make sure Congress keeps its promise to boost funds for infrastructure. He added the association would continue to encourage construction workers to get vaccinated, and is planning to release new Spanish-language public service ads on the subject later this month to accompany a series of ads encouraging vaccinations AGC released last year.
“Our ultimate goal is to make sure that contractors’ optimistic outlook for 2022 becomes a reality,” Sandherr says.
To review the full results of the survey, visit here.