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7 Construction Industry Trends to Watch for in 2023

From technological advancements to ongoing labor shortages and supply chain disruptions, you can expect to see some significant construction industry trends continuing to impact all corners of our market. The good news is the industry outlook remains relatively stable. As reported by the Associated Builders and Contractors (ABC) Backlog Indicator has reached its highest level since Q2 2019.

For your construction firm to remain competitive, we’ve assembled several vital trends you need to know in 2023.

 

Trend #1: Ongoing inflation and supply chain issues

Ongoing inflation and supply chain issues represent significant concerns across the construction industry in 2023. The past year’s rising inflation rates have spiked steel, iron, lumber, and other critical materials costs. Although some prices for materials have begun to stabilize, construction material budget uncertainties remain under headwinds into 2023. Furthermore, shipping bottlenecks and order lead times are expected to ease this year slightly, but unexpected delays can lead to higher final costs and extended timelines.

Adapting critical business practices may help construction contractors position themselves for success in 2023. For example:

  • Modifying bidding strategies: Inflation and supply chain delays impact project schedule and final cost, worsening productivity performance and expenses. Contingency project budget rates were upended last year (historically between 5% & 10%), but this varies depending on project size and the construction company’s buying power. The bottom line, it’s time to assess your pricing model to mitigate the risk of potential delays and higher costs to protect your profit margin.
  • Adjusting contract terms: Many construction trade contractors negotiate for changes in contracts with partners, customers, and project stakeholders. For example, according to Construction Dive, contractors can benefit from requesting contract clauses limiting the financial impacts of inflation and supply chain delays.
  • Improving supply chain policies: Construction trade contractors can mitigate the risk of delays by working with multiple material suppliers under contingency or emergency agreements to ensure timely delivery. Meanwhile, being close to your most used suppliers allows for faster arrivals and long-term savings.

Material Shortages and Soaring Costs may continue as more than 90% of builders say they face material shortages. The AGC released data in June 2022 that reported prices for construction materials used in non-residential projects were up 17% since June 2021. many cases were even higher. These shortages and price hikes will likely impact construction firms’ bottom line in 2023.

 

Trend #2: Expanding Outreach to Tackle the continuing labor shortage

The ongoing labor shortage is nothing new. According to an ABC study, 590,000 new skilled craft workers must fill construction jobs in 2023. Below are some recommendations to help your construction firm effectively fill positions.

Diversifying the Candidate Pool

A diverse workforce is a potential solution for the labor shortage and helps construction companies grow. According to a McKinsey study, companies are 35% more likely to have financial gains by diversifying their workforce. In addition, diverse workforces have higher retention, innovation, and productivity levels, which offer both short and long-term benefits. Therefore, construction contractors should consider expanding their Outreach to underrepresented groups in the industry. Those groups include:

  • Women: According to the Labor Bureau Statistics, women make up 14% of the construction workforce pool, an all-time high, and their growing interest should also be part of your ongoing recruitment efforts.
  • Minorities: According to the National Center for Construction Education and Research, 93.8% of construction workers were maleand 58.7% identified as white in 2022. Efforts to increase diversity among minorities will help your firm build the workforce needed to sustain future growth.
  • Military veterans: Approximately 200,000 vets transition out of the military each year, yet only makeup 7% of the construction workforce. Recruiting military veterans already equipped with leadership, technical, and organizational skills can seamlessly translate to construction careers.

The Next Generation Should be Part of Your Outreach.

Recruiting any generation of employees begins with your HR team understanding their unique preferences. For example, candidates for construction jobs desire schedule flexibility and autonomy in their work. Competitive wages that outpace inflation are also highly valued. And overall, Generation Z prefers jobs that offer career growth, skill improvement, and upward mobility. Additional tactics that you can use to promote the benefits of working with your construction firm include:

  • Local partnerships: Focus on partnering with local schools, universities, and community organizations to attract young people to the industry; Lead/participate in “construction” career workshops and build your talent pipeline.
  • Partner with a staffing agency: Construction staffing agencies focusing on construction have large pools of pre-screened candidates across various roles. This way, construction companies will have a higher chance of finding the right fit for their needs.
  • Community involvement: A community-engaged construction company understands the importance of completing projects and driving more progress into their communities. Community involvement is crucial to developing relationships, networking, and recruiting new employees to the construction field.

 

Trend #3: Technology advancements are continuing to enhance safety and productivity

Technology trends in the construction industry are driving innovation and change. Construction firms that lead adoption and improve their service capabilities will leave the competition behind. As the construction industry embraces digitization, construction firms are adding various new tools and resources. For example:

  • Internet of Things (IoT): Combining real-time data from GPS devices, wearable tracking technology, and safety applications allows construction companies to measure the overall safety of the job site and perform data collection through drones, robots, and laser scanning.
  • Collision avoidance systems: Offer proximity alerts and blind spot coverage to help enhance the safety of equipment operators and those around them.
  • 3-D printing: According to a recent study by Research & Markets, the 3-D printing construction market will see an 87.3% growth rate over the next ten years. The printers can create different structural items, including metal, concrete, and composite, with materials and options continuing to grow.
  • Helmet Revolution: Hard hats have been around jobsites for decades and are relatively unchanged. However, there’s now a “helmet revolution” in the industry. HexArmor developed a helmet featuring a Kinetix suspension system that can absorb and direct impacts and reduces 40% or more of the impact force than other helmets.
  • Wearables: Tech-enabled, wearable safety equipment is becoming common on construction jobsites. For example, Kenzen has developed a continuous health monitoring solution to predict and prevent industrial workforce injuries.

Jobsite Safety Continues to Rise.

Injuries from falls increased by 41% from 2011-to-2019, and the number of nonfatal injuries rose by 8%. Safety helmet improvements and wearable technologies are designed to help mitigate accidents. In addition, many construction firms are employing other new strategies to make the jobsite safer, such as moving more work offsite for prefabrication and modular construction.

According to McKinsey and other sources, the construction industry is the largest in the world, making up 13% of the global GDP, but it is one of the slowest growing. New technologies are helping to speed up that growth.

 

Trend 4. Rapid Growth in Virtual Construction Market

One of the largest adoptions of technology in construction has been virtual design and visualization. Ranging from Building Information Modeling (BIM) to improved Construction Management Software (project management, scheduling, accounting & payroll, document management, etc.), these tools help contractors build more efficiently.

  • Virtual design and construction (VDC) software enables virtual environments to visualize and engineer building structures before construction begins and is accessible to stakeholders via desktop, mobile devices, and augmented and virtual reality hardware.

With rework of faulty or incorrect builds accounting for approximately 30% of construction project costs, Virtual design helps cut down on this by enabling builders to create structures in a virtual environment during planning phases.

  • Building Information Modeling (BIM)is the most popular VDC solution in the construction industry. BIM enables architects, engineers, designers, or other staff to generate a virtual model of a physical building or structure down to a small spool. This level of detail in a virtual environment is unprecedented.

As of 2020, the BIM market was from $4.5 B to $5.2 B but is expected to rebound from post-pandemic and grow at a CAGR of 14.5% over the next few years. McKinsey found that BIM technology has achieved an adoption rate of about 60-70%. The NBS BIM Report in 2020 reported that 73% of respondents use BIM.

With prefabrication and modular construction, Virtual Design and BIM are consistently helping construction firms maintain budgets, reduce costs in some areas and accelerate construction schedules. In addition, Autodesk’s AutoCAD, BIM 360, and REVIT technology are virtual modeling standards with traditional AutoCAD software used by 85% of the market.

 

Trend 5. Prefabrication and Modular Construction are Changing the Game

Modular construction is a practice that constructs anywhere between 60-90% of a building or structure offsite before bringing the components to the construction jobsite. Prefabrication is common practice within modular construction, but a process for building or manufacturing specific components at an offsite facility and readying them for assembly or installation on the jobsite.

The global modular construction market in 2020 hit $82.3 billion and will likely grow to $108.8 billion by 2025.

Although this is relatively small compared to the entire construction industry, modular and prefabrication construction rapidly grows as companies identify opportunities to employ specialty practices.

For example, between 2015 & 2018, new North American permanent modular construction projects rose by 51%, according to McKinsey. Over this same period, the modular construction industry’s total revenue doubled.

According to Dodge Data & Analytics and many other sources, general contractors (GCs), trade contractors, architects, and developers are discovering that prefabrication and modular construction helps reduce costs, accelerate project schedules, reduce waste, and increases worker safety. 90% of respondents to Dodge’s 2020 Prefab and Modular Construction Report said that these methods were more beneficial than traditional “stick-building” construction.

According to Dodge Data Analytics, healthcare facilities, hotels, motels, and multi-family residential are expected to see the most prefabrication and modular construction practices over the next three years.

 

Construction Trends - Fabrication Shop Management Software

Trend 6. Drone Technology Skyrocketing in the Construction 

Drone technology is rapidly helping the construction industry become more efficient. DroneDeploy completed a study in 2018 that highlighted adoption in the construction industry was faster than in any other industry.

Drones are now responsible for substantial cost savings on major construction projects. A few benefits include the following:

  • DroneBase estimates that drone usage has helped cut down $160 billion in annual waste on construction jobsites.
  • Drones measuring stockpiles of building materials in real time has resulted in a 61% increase in measurement accuracy.
  • Reducing construction worker injuries and deaths by using drones to survey and inspect high-risk areas on the jobsite keeping workers out of harm’s way.

Drones are a relatively low-cost investment that provide near immediate returns, not to mention they often satisfy stakeholders who want videos or photos of the job-site.

 

Trend 7. The Rise of Smart Cities & Construction Approaches

Another major trend impacting the construction industry is the growth and conversion of cities into smart cities. A smart city is fully integrated with the internet of things (IoT), where the infrastructure and buildings collect data to help everything run more efficiently.

Construction firms need to be prepared in the way that artificial intelligence (AI) is incorporated into an urban community. Construction managers will need the knowledge to integrate AI into their workflow and how it will function in the constructed building. Construction is already shifting from a pure physical industry to a technological one with smart buildings that make up smart communities. 

This accelerates the creation, integration, and adoption of capabilities central to smart city projects. The frameworks can be divided into five primary dimensions: human, technology, institutional, energy, and data management frameworks. Maneuvering between the physical and technological construction needs is vital to a successful leader.

The IDC forecasts investments in smart cities will grow to $203 billion by 2024. Some estimates indicate that the market will double again to over $676 billion by 2028.

 

Other construction industry trends:  

  • 3D Printing – The 3D printing construction market’s growth rate is incredible at a CAGR of 100% through 2030. This type of 3D printing can use various materials: concrete, geopolymers, fiber, sand, and others.
  • Construction Robotics & Automation Enhance Productivity – Early adopters are helping achieve employment gaps by employing robotics and other automation strategies. The market for construction robots is expected to reach $359 million by 2031. ABB’s survey commissioned last year showed that more than half of construction companies are using robots, and 81% expect to introduce robots within the next ten years.
  • Green Buildings – Green building involves building environmentally sustainable buildings using ecologically sustainable design processes to meet government and regulatory requirements. According to Dodge’s World Green Building Report, almost half of all construction and design respondents said they expected most of their projects to be green by the end of this year.

 

Conclusion

2023 and onward will bring excellent opportunities for construction firms to build more efficiently, effectively, and profitably. Technology adoption and innovating your client-focused services are the overriding themes that tie these trends together.

Interestingly, these themes also tend to result in cost savings, which should help speed up the rate of adoption.

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