Construction tested by rising costs, interest rates and shortages

The construction industry is facing major challenges from rising costs and shortages of labor and materials as well as rising interest rates, according to the Marcum Index of commercial construction.

“While overall entrepreneur confidence has fallen a little recently, many entrepreneurs continue to expect growth in sales, employment and even profit margins over the next six months,” Anirban Basu, chief construction economist at Marcum and author of the report, said in a company statement. “Despite rising capital costs, demand for construction services remains high. Many entrepreneurs report operating at full capacity.

While construction spending in the residential sector continues to rise, non-residential spending remains weak. Non-residential construction spending rose 5.6% year over year, but taking inflation into account, it represents a decline. Another measure of construction spending, investment in non-residential structures, a component of gross domestic product, fell 0.9% in the first quarter of 2022 and has now fallen in nine of the past 10 quarters. .

In April 2022, the construction industry recovered all the jobs lost during the first months of the pandemic.

“Employment in the industry is 4,000 jobs above February 2020 levels,” Basu said. “This represents a rapid recovery by historical standards, with the industry having added more than 1.1 million jobs since the worst of the recession. That said, employment in the industry is significantly lower than it would have been had the pandemic not happened, in part because many former workers retired permanently as the pandemic took hold. tore up the economy and endangered public and personal health.

Inflation and material prices remain a pressing issue for the industry, and one that has squeezed profit margins.

The national leader in the construction of Marcum, Joseph Natarelli, said: “Builders are still learning how to deal with this ‘new normal’. They buy and secure materials much earlier and get funds to pay for materials up front, even before work begins.

Natarelli also said there are a lot more joint ventures.

“Contractors with labor issues are partnering with builders who have a safer workforce to ensure they have labor for the jobs,” a- he declared. “The same goes for the supply of materials. We’re seeing contractors with an “in” on the supply side entering joint ventures with other builders who don’t have that access. »

Despite the obstacles, Natarelli foresees steady and steady growth in the construction industry in the months ahead.

“While I think residential is going to slow down a bit due to the impact of interest rates, I see overall construction backlogs fuller than they have been in a long time and I have a lot of optimism for the industry in the months ahead.”

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