By: Kendall Jones on January 17th, 2022
Top 5 Commercial Construction Trends for 2022
All in all, 2021 was an okay year for the commercial construction industry. Overall construction spending was up, with residential construction put-in-place seeing an increase but nonresidential experiencing its second year of decline.
Construction companies also had to deal with continuing labor shortages and issues with getting building materials delivered on time due to supply issues and rising material prices. They’ve also had to contend with the ongoing coronavirus pandemic, first with the Delta variant earlier in the year and then later with the Omicron variant, which appears to be more transmissible even among previously vaccinated individuals.
So, what should we look forward to in 2022 in commercial construction? Here are five trends we are keeping an eye on as the year unfolds.
Construction Put-in-Place Growth
Construction spending through November 2021 totaled $1.46 trillion, setting the year up to be another record-high for construction put-in-place. Once the final numbers are in, ConstructConnect is forecasting total put-in-place for 2021 to be around $1.57 trillion, which would be an increase of 6.8% over 2020.
Construction put-in-place is the estimated total dollar value of construction work done in the United States and is compiled monthly by the U.S. Census Bureau.
For 2022, ConstructConnect is expecting a 6.6% increase in put-in-place to $1.67 trillion. Nonresidential construction should get back on track after two consecutive years of decreased construction spending caused by the pandemic and increase 5.6% to $837 billion in 2022.
Residential construction spending isn’t expected to have the explosive increase it had in 2021 but should be strong at 7.7% above last year. Residential put-in-place is expected to increase to $836.8 billion in 2022, roughly matching nonresidential construction spending.
Some of the top areas for growth in construction put-in-place in 2022 will come from infrastructure spending. After years of stopgap measures and short-term spending bills, Congress finally passed a long-term infrastructure bill with the $1.2 trillion Infrastructure Investment and Jobs Act.
Over the next five years, $550 billion of new federal investments will be spent on constructing new infrastructure and making much-needed repairs to existing infrastructure. The bill calls for investing $110 billion for roads, bridges, and infrastructure projects, $40 billion for bridge repairs and replacement, $39 billion for public transit, $66 billion for passenger and freight rail, $65 billion for broadband internet, $65 billion to rebuild the electric grid, and $55 billion to upgrade water infrastructure.
In addition to making much-needed repairs and improvements to our nation’s crumbling infrastructure, the bill is expected to be a big job creator for the construction industry over the next couple of years. The big question is, where will those workers come from?
Construction Employment & Labor Woes
In 2020, at the onset of the pandemic, the construction industry shed over 1.1 million jobs in just two months: March and April. By the end of the year, the construction industry had added back all but 248,000 of those jobs, per the Bureau of Labor Statistics.
In 2021, the construction industry added only 160,000 jobs after a mostly up and down year for jobs gains. Those meager gains left the construction industry down 88,000 jobs from the pre-pandemic levels. Construction unemployment was cut nearly in half over the course of 2021, starting at 9.4% in January and falling all the way down to just 5.0% in December.
Job openings were also up and down in 2021, from a low of 242,000 to a high of 453,000 in October. Preliminary data from November 2021 has job openings in construction at 307,000.
Data from the BLS shows that average hourly wages in construction were up 4.61% for all employees in 2021 with nonsupervisory employees doing slightly better as they saw their average hourly earnings increase 5.26% last year. In addition to increasing wages, construction firms still have a long way to go in attracting and retaining the next generation of workers as they try to add more skilled workers to their payrolls.
The construction industry has been struggling with a skilled labor shortage dating back to the Great Recession. The issue then, as it is now, is more workers are retiring out of the industry compared to younger workers coming in. Construction firms are going to have to increase their efforts to find, train, and retain skilled workers to keep up with demand.
Construction work has a stigma that all of its jobs are dirty, dangerous, labor-intensive, and low-paying. While some of that is true to a certain degree, the construction industry offers a wide variety of high-paying jobs and plenty of opportunities for career advancement into lucrative positions.
The pandemic isn’t helping out much either with community college enrollment, which provides vocational training for many skilled construction jobs, is down 9.5%. Part of President Biden’s initial infrastructure plan included investing $100 billion in workforce development to create apprenticeship programs and provide job training, but unfortunately, that was left out of the final bill.
Construction firms are going to need to get aggressive in their recruitment and retention programs to start attracting and providing training to a younger workforce in order to grow headcount in 2022 and beyond.
Material Costs & Supply Chain Issues
Another big story in construction last year was the astronomical jump in construction material prices. Earlier in the year, the cost of certain materials like softwood lumber, particleboard and oriented strand board, regular gasoline, and diesel fuel more than doubled what they were the year prior. There were also big jumps in the price of plywood, asphalt, and iron and steel scrap.
While prices for some materials have started to come back down in recent months, it’s likely that we’ll see more up and down movement in 2022 for most construction material costs. The most recent data from November 2021 shows that inputs to new construction, excluding capital investment, labor, and imports were up 20.54% from a year ago, the construction materials special index was up 34.65%, and final demand construction was up 12.27% from a year prior.
Materials delivery lead time is double, triple, or higher than what it was pre-pandemic and that looks like that will continue to some extent into 2022. Supply chain issues will likely continue as demand for materials stays strong and possible complications due to the faster-spreading omicron variant could result in even longer lead times for certain materials.
As contractors sign new contracts and take on more work for later in the year, they need to stay on top of their suppliers and get their orders in sooner than normal to ensure materials are delivered on time and to keep track of the potential for rapid changes in material costs.
Focus on Jobsite Safety
Jobsite safety is always a hot topic in the construction industry. Construction worker deaths account for the highest of all industries, year in and year out. The construction industry is also typically at the top of the list for having one of the highest fatal injury rates.
The fatal injury rate for the construction industry in 2020 was 10.2, up from 9.7 in 2019. For all workers, the fatal injury rate dropped from 3.5 in 2019 to 3.4 in 2020. The fatal injury rate is calculated as the number of fatal occupations injuries per 100,000 full-time equivalent (FTE) workers.
Not all construction accidents end tragically, but many of the nonfatal injuries result in workers missing time away from work. In 2020, the median number of days away from work was 11 days. That’s a lot of lost productivity for construction firms.
As mentioned earlier, the construction industry has a bad reputation, justifiably so, for being dangerous. The only way to turn that around is to start getting the number of fatal and nonfatal injuries down. That starts with each and every firm making safety a top priority.
Since the pandemic hit, we’ve also seen many companies put a greater emphasis on mental health and the overall well-being of employees. For construction firms to be able to competitively attract top talent, look for safety and physical and mental health to be a major focus in 2022 and beyond.
Construction Technology Adoption
If there’s any positive takeaways from the pandemic, it’s that the construction industry really started to embrace technology in order to keep their projects, and business, moving forward. At the onset of the pandemic, something as foreign as a virtual pre-bid meeting or site visit started to become commonplace.
While the industry as a whole has been notoriously slow to adopt and invest in technology, those firms that do are reaping the benefits. Construction technology is going to continue to make inroads to solving some of the industry’s major problems: safety, productivity, and labor shortages.
We are seeing robots, drones, and autonomous construction equipment hitting jobsites. They are performing tasks that previously required skilled workers and are helping reduce the number of workers being placed in dangerous conditions.
Drones are conducting site surveys and inspecting bridges. Autonomous equipment is being used for earthmoving and site work operations. Robots are handling strenuous, repetitive tasks like laying bricks, tying rebar, and hanging drywall.
Building Information Modeling (BIM) and other construction software are being integrated with virtual and augmented reality to help visualize projects, perform clash detections prior to construction, increase productivity, and improve communication and collaboration. VR simulators are also being used to train construction workers on heavy equipment.
Wearables for monitoring workers' vitals and movements in order to keep them safe and alert them of potential hazards are starting to catch on. The technology can also be used to track their movement on the jobsite in order to improve overall productivity.
What do you think? Drop us a comment below to let us know what commercial construction trends you are keeping an eye on in 2022.
Worried about a slowing of construction spending or another economic downturn? ConstructConnect can help keep your project pipeline flowing and find the best projects for your company to bid.
About Kendall Jones
Kendall Jones is the Editor in Chief at ConstructConnect. He has been writing about the construction industry for years, covering a wide range of topics from safety and technology to industry news and operating insights.