Navigating risks to avoid a potential storm

Our last report asked how to ride out the twists and turns. Well, the rollercoaster ride continues as we navigate through 2023 …

The wider economy has shown resilience despite continuing to experience challenging conditions. Some economists are, once again, sounding the alarm over an imminent downturn due to high interest rates and tightening credit conditions.

Whilst the construction industry won't escape the issues disrupting the economy, it is optimistic for overall growth this year. Even so, there is a mixed picture for sectors as some will be hampered by broader conditions, particularly lending constraints. Higher construction costs, supply chain limitations and labor availability challenges have also resulted in project delays.

However, anticipated spending from government stimulus will boost the industry in 2023 and beyond, driven by funds from the Infrastructure Investment and Jobs Act (IIJA), the Inflation Reduction Act (IRA) and the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act of 2022.

Opportunities also remain in other sectors where demand is unabated, such as data centers and mission critical, industrial and warehousing and logistics.

The remainder of 2023 will see the industry face familiar problems — cost escalation, inflation, supply chain constraints and materials and labor availability challenges — although on a lesser scale than last year.

Regarding materials, some prices are reducing whereas others are still seeing evidence of increase. On the topic of labor, the key concern is developing a sufficiently skilled workforce, with some businesses increasing wages and offering training to attract workers, which will have a knock-on effect on construction costs.

Other worries include the impact of inflation on project budgets and whether this will lead to the scaling back of deliverables.

The industry has demonstrated its resilience and will continue to adapt to the market conditions — whether that be sourcing alternative materials and products, stockpiling ahead of project awards, early engagement with the supply chain or other measures.

By embracing digitalization and new technologies, as well as the appropriate use of modular construction, companies will not only improve productivity and efficiency but also make the most of resources available, reducing wastage and maximizing labor to deliver profitable and successful projects.

Overall, it remains a challenging backdrop, but the US construction industry is expected to navigate a safe course of growth through the waves of challenges.