2018 Construction Outlook

The construction industry appears to be poised for additional growth in 2018. It is expected that demand for all construction services will expand across both private and public-sector projects for assorted reasons, including a strong economy and renewed focus on infrastructure investments. While the continued growth will create more opportunities for industry companies, it will also create new challenges for management. According to the 2018 Construction Hiring and Business Outlook, published by the Associated General Contractors of America, there are several areas where companies will need to focus to sustain growth. These include the acquiring and retaining of skilled labor, managing workforce shortages, leveraging technology across the project, and embracing innovation. All of this is against the backdrop of tax reform which is expected to fuel much of the expected growth. To help clients, prospects, and others understand the challenges, Wilson Lewis has provided a summary of key points below.

Key Survey Information

There were over 1,000 firms that participated in the survey from 49 states and Washington DC. 30% of respondents reported revenue of less than $10M, 33% had between $100.1 to $150M, and 8% had over $500M worth of revenue. 33% of the companies surveyed reported they employ union workers most or all of the time, while the rest of respondents are either exclusively open or only occasionally use union labor.

Survey Results

• Continued Growth Expected – Survey respondents expect to see continued growth in every segment. 22% of respondents expect to see growth in the private office segment, 21% expect growth in the transportation, retail, and lodging, 20% in elementary school construction, and 18% for hospitals and highway construction. Respondents were less enthusiastic about multifamily and residential, with 16% responding favorably and 8% expecting growth in federal contracts. The good news is that growth is expected, but the market will favor those who focus in key segments.
• Workforce Shortages – Most respondents expect it to be more difficult to retain workers in 2018. 82% of respondents expect it to remain difficult or to become more difficult to recruit and hire qualified workers and 78% reported they are having difficulty finding workers to hire to fill new roles. To address the shortage, companies are employing new strategies to retain workers. 60% of respondents have increased base pay, 36% have provided additional bonus and performance incentives, and 56% plan to increase investments in training.
• Innovation – According to the survey results, industry companies continue to invest in innovation such as Building Information Modeling (BIM) to create project efficiencies. 49% of respondents expect the amount of work they perform using BIM to remain the same or increase in 2018, 46% are using systems to identify clashes in designs, 45% use BIM to ensure that designs are constructible, and 42% use BIM to visually communicate project scope to clients.
• Strategic IT Implementation – Due to the tight labor market and need to maintain margins, more industry companies are considering how to integrate IT into their workflow. 52% of respondents have a formal IT plan that supports business objectives. 8% of respondents that don’t have a formal IT plan are going to create one in 2018. Funding for IT will also increase with 51% of respondents indicating they plan to spend 1% of revenue on IT needs. In addition, 43% indicated they will expand IT spending over last year.
• Expanded BIM Usage – While BIM has been primarily used for clash detection and visual communication, companies will be expanding their uses. 35% of respondents plan on using it for scheduling and resource planning, 35% for 3d model-based estimating, and 20% for safety efforts.

Contact Us

The good news is that growth is expected to continue in 2018, but the staffing challenges are also expected to continue. Construction companies will need to find new ways to drive efficiencies and process optimization to stay profitable. If you have questions about the report, or need assistance with a construction, tax, audit, or accounting issue, Wilson Lewis can help. For additional information please call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.