Construction employment continued to show strength across much of the United States through November 2017, when there were 191,000 more workers in the construction industry than during the same month a year earlier, and the construction unemployment rate fell by 0.7% to 5%, the lowest it’s been on record for the month of November, according to estimates released yesterday by Associated Builders and Contractors, a national trade group representing more than 21,000 members.
However, the industry still struggles with labor shortages that could be inhibiting investment and new construction.
During the first nine months of 2017, month-by-month employment growth was “minimal,” due primarily to “historically low unemployment” that limited the new construction talent pool, according to JLL’s Construction Outlook for the third quarter of 2017, which the market research and consulting firm released late last month.
During the third quarter of 2017, construction-related spending inched up by only 1.9% from the same period in 2016. “While topline spending is still increasing, consecutive quarters are demonstrating smaller and smaller gains over past years—underlining the trajectory towards a mature and stable industry,” JLL writes. Percentage growth of year-over-year spending decreased for nine out of the preceding 11 months, but was still above zero, “pointing to a tapering growth curve.”
With qualified construction workers being harder to find, labor costs were volatile through the first nine months of last year. Image: JLL Research
Citing Census Bureau estimates, Associated Builders and Contractors posted that nonresidential construction spending declined in November by 1.3%, to $719.2 billion, compared to the same month a year earlier. Private nonres spending was down by 3.1%, while public-sector nonres spending grew by 1.7%. The gainers included commercial, educational, lodging, transportation, healthcare, and public safety. Manufacturing construction took the biggest hit, down 15.6%.
Commercial real estate has proven over the past several years that it can perform well regardless of how the economy in general is growing. “Right now we see little in fundamentals to cause concern about real estate as an asset class,” JLL writes.
Public construction, infrastructure and public works projects picked up steam during the third quarter of 2017, while single-family home construction grew at nearly double-digit annualized growth, which is expected to continue in 2018. Multifamily starts, on the other hand, dipped.
While the groundbreaking of large scale private commercial projects began to scale back due to stretched-out timelines, commercial renovation and fit-out work strengthened, and should prevail through the next several quarters and beyond into 2019, JLL predicts.
The cost of building slowed in the third quarter, up by just 3% from third quarter 2016. But it still grew faster than construction spending primarily because of increasing labor costs. (Wages grew by nearly 3.4%, on an annualized basis, in the third quarter of 2017.) Indeed, JLL expects labor shortages to persist through 2018, at least, and for construction costs to be up another 3% this year. JLL expects wage growth to accelerate, potentially hitting 5% or higher during peak building seasons.
The severe weather events that hit certain areas of the country had a surprisingly minor impact on the availability of most building materials. Nevertheless, materials costs rose by 3% in the third quarter compared to the same period a year ago, and those costs “are beginning to outpace current demand,” says JLL. Impending tariffs on Canadian lumber imports could jack up lumber prices for U.S. purchasers by 20% this year.
Manpower shortages, and the prospect that labor and products will cost more, could finally push the construction industry to embrace technology to a greater degree than it has done so to this point. JLL sees BIM, artificial intelligence and big data, and prefab and offsite construction as the three technologies that show the most promise this year.
Related Stories
| Mar 28, 2012
Milestone reached for LEED-certified buildings?
Total number of major global green buildings now stands at 12,000.
| Mar 28, 2012
Holden Cancer Center opens at University of Iowa Hospitals and Clinics
The new cancer clinic provides a significant increase in patient space from the prior facility, which was located in an adjacent building.
| Mar 28, 2012
Meridian Design Build Begins work on 38 acre redevelopment project
The project includes construction of a new 150,585-sf cross dock facility that will include full service truck maintenance and repair bays, a truck wash, and approximately 20,000-sf of corporate office space.
| Mar 28, 2012
Tsoi/Kobis & Associates developing master plan for UT Southwestern Medical Center
Firm will spearhead strategies for transforming existing in-patient hospital into state-of-the-art ambulatory care facility.
| Mar 28, 2012
Ideas and input drive stories in online community, noraXchange
Community designed to help building and design professionals address challenges they face in their jobs.
| Mar 27, 2012
Bank of America Plaza becomes Atlanta's priciest repo
Repo will help reset market prices for real estate, and the eventual new owner will likely set rental rates at a new or near the bottom and improve the facilities to lure tenants.
| Mar 27, 2012
Skanska hires aviation construction expert Bob Postma
Postma will manage Skanska’s nationwide in-house team of airport construction experts who lead the industry in building and renovating airport facilities and their essential features.
| Mar 27, 2012
Precast concrete used for affordable, sustainable housing in New York
Largest affordable housing development in the nation will provide housing for close to 500,000 people.
| Mar 27, 2012
Groundbreaking held for Valencia College West Campus Building 10 in Orlando
Project led by design-build team of SchenkelShultz Architecture and McCree General Contractors, both of Orlando.
| Mar 27, 2012
Hollister Construction completes LEED Silver bank in Woodland Park, N.J.
Ground-up construction project included installation of solar panels.