Construction Outlook: Tight Labor Force, Increased Caution Will Continue To Impact Construction Come 2017
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The construction industry continued to see robust activity within all property sectors nationwide as of Q3, despite a deceleration in industry growth.
As companies continue to cut costs by shrinking office space and consolidating business units, uncertainties surrounding declining workloads persist. Coupled with the Fed's rate hike this month and lackluster economic growth, experts predict construction costs will continue to rise.
That's according to JLL's latest Construction Outlook report. The firm outlined three themes that will continue to have great impact on the construction industry in the coming months—risk, labor and technology.
As the economy enters its seventh year of expansion, experts are seeing signs of slowing growth—as evidenced by a more cautious tone among banks, developers and contractors. Commercial lending continues to tighten and banks are growing even more selective. But construction volume continues to grow, though JLL reports firms focused on government projects and infrastructure may experience some uncertainty in the coming months depending on the new policies of President-elect Donald Trump and his administration.
Though the US labor market is making strides—adding an average 181,000 new jobs a month with unemployment dropping to 4.6% in November—the construction labor force is dwindling. JLL reports construction starts, backlogs and pipelines are all within cyclical highs, but a lack of labor is stalling efforts. The industry is expected to continue to see a labor crunch until late 2017, when JLL reports there will be a softening in the industry due to slowing demand in oversaturated markets. Experts also project construction clients will begin to turn their attention to adaptive reuse products over new construction next year.
As firms continue to consolidate office space to cut costs, developers are looking to tech innovations to streamline the process—think virtual reality, IoT and cloud computing. Contractors, project managers and the like are embracing software, hardware and the sharing economy to boost productivity on the job, JLL reports. New software solutions continue to surface, providing apps and programs that allow workers to share access to information throughout the entire process, and drones continue to grow in popularity. Even shared-economy companies similar to Uber and Airbnb have hit the construction industry. Take Yard Club, for example—the company allows contractors to rent heavy-duty equipment to different firms when it's not in use.