Big Challenge For Commercial Construction Industry With Consistent Labor Force Shortage
The USG Corporation + American Chamber of Commerce and Commerce (index) index for Q1 2018 shows that almost two thirds of contractors are very optimistic about the fact that demand for commercial construction will be higher in the course of the year, but continuing concerns about labor shortages have put even greater pressure on the sector. More and more investors are turning to alternative building solutions such as prefabrication and modernization to increase productivity on the construction site and improve productivity.
The first quarter index points out the fact that contractors are now using novelties such as prefabricated and modular building materials to create more efficient construction (89 %), increase labor productivity (85%), drive cost savings (58 %) and provide a competitive edge in the market (51 %). In fact, 50 % of contractors report that their companies already use prefabricated and modular components, and the number was even larger among general contractors (72 %). About two-thirds of contractors report moderate demand for these building materials.
“Access to skilled labor is a constant concern, which has led contractors to increasingly seek solutions that help offset the site’s challenges,” said Jennifer Scanlon, the President and also CEO of USG Corporation. “There are important opportunities to introduce innovations aimed at improving site efficiency and strengthening the industry, such as solutions that enable the production of prefabricated and modular building components”.
Northeast contractors (69%) reported being the highest users of prefabricated and modular components when compared with the Southern contractors, where only 24% of the prefabricated and modular components are used. Companies in the Northeast also expect to hire fewer employees – 38% of contractors in the region expect to hire more employees in the next six months, compared with 57% in the South, 59% in the West and 68% in the Midwest. Nevertheless, in all regions, worries about the cost of hiring skilled workers have remained constant over the past year – nearly two-thirds (64 percent) of contractors expect these costs to increase over the next six months.
Despite labor force concerns, contractor’s morale remained stable during the first quarter, due to strong revenue forecasts and higher profit margins, yielding a compound result of 74. “As we continually work to build our neighborhoods, cities, regions and highways, as well as the workforce that supports our growth, innovation is becoming a key element in moving our country into the 21st century,” said Thomas J. Donohue, President and CEO of the United States House. “We must invest in a skilled, competitive and motivated workforce and adopt new innovations to be able to compete globally.
The index analyses the results of three main indicators to assess confidence in the commercial construction sector – portfolio level, new business opportunities and sales forecasts – and generates a composite index on a scale from 0 to 100 which serves as a quarterly business health indicator. The composite rating for the first quarter of 2018 was 74 and has then remained stable since the fourth quarter of 2017.
THE Q1 2018 RESULTS FROM THE THREE KEY DRIVERS WERE:
Order backlog: Averagely, contractors currently have an order backlog of 8.9 months, relatively close to the average ideal quantity of 12.2 months, which maintains market stability, although there is room for growth. This represents 73% of the ideal backlog, two points lower than in the fourth quarter of 2017. New Business: Almost all (98 percent) contractors report high or moderate confidence in commercial construction demand. Year over year, the number of contractors with high confidence in demand over the next 12 months increased 11 percentage points (from 51 percent in the first quarter of 2017 to 62 percent in the first quarter of 2018).
Revenue: More than half (54%) of contractors are hoping for increment in revenue next year. Since last quarter, this figure has increased by seven points (47 percent in the fourth quarter of 2017). The survey was conducted jointly with Dodge Data & Analytics (DD&A), a leading provider of information and data for the construction industry, through a survey of commercial and institutional contractors.
ABOUT THE INDEX
The USG Corporation + U.S. Chamber of Commercial Construction Index are a quarterly economic index to evaluate prospects and confidence in the commercial construction industry. The USG Corporation and the US House of Representatives, together with Dodge Data & Analytics (DD&A), work together to bring forth this index. Every three months, DD&A researchers receive feedback from more than 2,700 commercial decision-makers in the construction industry to better understand their confidence in the sector and other key trends. This panel enables DD&A to deliver results that are representative of the entire US construction industry in terms of geography, size and type of business.
It is worth noting that the Commercial Construction General Contractor report is presented for general information only. It does not also support an investment decision regarding USG Corporation, nor is it intended to be used for marketing purposes for an existing or potential USG investor. This report is not a forecast of USG’s future results, and USG’s actual results may differ materially from those of commercial construction companies.
Info provided in part from USG Corporation