Construction contractors expect increasing demand for numerous types of projects in 2022 despite ongoing supply chain and labor challenges, as most firms plan to add workers this year, according to a business outlook from Associated General Contractors of America and Sage: “Expecting Growth While Coping with the Lingering Impacts of the Pandemic: The 2022 Construction Hiring & Business Outlook.”
“Contractors are, overall, very optimistic about the outlook for the construction industry in 2022,” said Stephen E. Sandherr, AGC CEO, in a prepared statement. “While contractors face challenges this year, most of those will be centered on the need to keep pace with growing demand for construction projects.”
Three of four (74 percent) of respondents expect their firms will expand headcount in 2022, compared to just 9 percent who expect a decrease. About half (47 percent) of firms expect to increase their headcount by 10 percent or less; but 22 percent say their headcount will grow by 11 to 25 percent, and 5 percent anticipate an increase of more than 25 percent.
Adding those workers will be a challenge, according to the report. More than eight in 10 (83 percent) report they are having a hard time filling some or all salaried or hourly craft positions, compared to only 8 percent who say they are having no difficulty. And three-fourths of respondents say it will continue to be hard to hire or will become harder to hire this year.
The percentage of respondents who expect a market segment to expand exceeds the percentage who expect it to contract—known as the net reading—in 15 of the 17 categories of projects included in the survey. Contractors are most optimistic about the market for highway and bridge construction, which has a net reading of positive 57 percent. They are similarly optimistic about transit, rail, and airports projects—with a net of 51 percent—and water and sewer projects—net of 50 percent.
These segments all stand to see increased federal investments because of the recently passed Bipartisan Infrastructure bill. Contractors are also upbeat about demand for federal construction projects, with a net reading of 37 percent, and power construction, with a net reading of 29 percent.
The highest expectations among predominantly private-sector categories, with a net reading of 41 percent each, are for warehouses and other healthcare facilities, which includes clinics, testing facilities and medical labs. The outlook for hospital construction is also strong, with a net reading of 38 percent.
Contractors were also optimistic about multifamily residential construction, with a net reading of 32 percent, and manufacturing construction, with a net reading of 27 percent. Expectations were more subdued, however, for public buildings, with a net reading of 20 percent; kindergarten through 12th grade school construction, with a net reading of 19 percent; higher education facilities, with a 16 percent net reading; and lodging, with a 6 percent net reading. Only two categories received negative net readings, both of -8 percent: retail and private office construction.
The pandemic continues to impact the construction industry, according to AGC. Eight in 10 (84 percent) of respondents report costs have been higher than anticipated, and 72 percent say projects have taken longer than anticipated because of the pandemic. As a result, 69 percent have put higher prices into bids or contracts, and 44 percent have specified longer completion times.
Supply chain bottlenecks are also impacting construction. Only 10 percent of firms report they have not had any significant supply chain problems. Six in 10 (61 percent) have turned to alternative suppliers for materials, and 48 percent have specified alternative materials or products.
Rising construction costs and slowing schedules have contributed to a significant number of project delays and cancellations. About half (46 percent) of contractors report having a project delayed in 2021 but rescheduled, and 32 percent had a project postponed or canceled that has not been rescheduled.
“The last two years have become increasingly unpredictable, due in large part to the coronavirus and public officials’ varied reactions to it,” said Ken Simonson, AGC chief economist, in a statement. “But, assuming current trends hold, 2022 should be a relatively strong year for the construction industry.”
Officials with Sage noted that firms are being more strategic about information technology as they try to remain competitive in the current environment. Six in 10 (61 percent) of contractors indicate they currently have a formal IT plan that supports business objectives. An additional 7 percent plan to create a formal plan in 2022.
“Amid the challenges the industry faces, technology plays an essential role in keeping teams connected and projects moving,” said Dustin Stephens, VP of construction and real estate, Sage, in a statement. “The past few years have highlighted just how crucial mobile and cloud-based solutions are, and we will continue to see these technologies play an integral role in helping construction firms bounce back.”
Stephens said that most firms plan to keep their technology investment about the same as last year. When asked whether they planned to increase or decrease investment or stay the same in 15 different types of technologies, the majority of respondents—ranging between 69 and 89 percent—said their investments would remain the same.
The Outlook was based on survey results from more than 1,000 firms from all 50 states and the District of Columbia and can be downloaded here.