The just-released U.S. Construction and Infrastructure Survey for Q4 2019 from RICS and the Association for Advancement of Cost Engineering International (AACEI) generally paints a positive picture, with workloads increasing in the last three months of 2019. However, despite solid activity reported across the sector, labor and skill shortages were cited as key constraints on output, indicative of a major gap as the current construction workforce ages and companies are still trying to attract younger and more diversified talent. When looking at the results across regions, projections as to the outlook are particularly robust across the U.S. South.
“The shortage of labor, and particularly skilled labor, is having a significant impact on affordability as companies compete for qualified cost managers, project managers and skilled trades,” said Simon Rubinsohn, chief economist with RICS. “This trend is likely to continue to limit construction activity over the short and long terms.”
There is overall optimism regarding the outlook for workloads, output, profit margins and new hiring over the coming 12 months. An increase in output was also reported across all segments led by particularly solid growth in public works and private commercial projects. Contributors noted an increase in residential construction, a trend that continues to be supported by lower mortgage rates and stronger demand from younger potential buyers. Meanwhile, infrastructure workloads were also said to have risen with solid expansion in activity reported in the communication, airports and roads components. In keeping with the positive tone, the report notes an increase in business enquiries, new and repair and maintenance work as well as headcount. Contributors from larger organizations appear to be more positive relative to small-sized firms.
Along with this labor and skills shortage, the results indicate a number of headwinds facing the industry. A notable share of contributors reported that financial constraints and costs of materials are also affecting output across the sector, which appears to be making it more difficult to expand profit margins. Overall, the outlook for profit margins is less positive than other industry indicators.
“The forecasted market growth, combined with the professional and craft labor shortages already being experienced, present an opportunity for companies able to introduce technological innovations increasing efficiencies in managing and controlling projects as well as the direct execution of construction activities,” said Chris Caddell, senior vice president at Turner and Townsend and president-elect of AACEI.
