We have withstood 2020—the storm—and now, in 2021, we are in the messy middle. We all know construction work tends to lag behind the overall economy. Now, it is time to ask a very important question: What will future hold? A new report shows construction has not yet reached the bottom.
JLL’s Construction Outlook shows nonresidential construction starts were down 24% last year, which means less work will take place this year, even if new projects pick up again. Additionally, nonresidential construction volume is expected to decline again in 2021 after already falling in 2020. In fact, the report goes as far as to say a year of relative stability does not mean a year of growth. Get ready for that dip.
The report also dives into the broader macroeconomic reasons that this recovery will be different from the last one. For instance, the speed of the rebound, stimulus spending, and vaccination timelines are very fluid at the moment. Here are two other factors to consider: the range between sector forecasts is wide and this is not a total construction downturn. Single-family residential construction is still booming.
Here are some of the key forecasts from the JLL 2021 Construction Outlook:
- Total construction costs: Every year from 2012 to 2019 recorded between 3.5-5.5% cost inflation across U.S. construction. For the full year, 2021 will bounce back to be within that range, and may even approach the higher end of it.
- Labor costs: We will see continued growth in 2021, with labor costs expected to increase in the range of 2-5%.
- Material costs: No shock here, as costs will increase in the range of 4-6% this year. Volatility was high last year due to shocks from the pandemic and will remain high as this year progresses.
- Construction volume: Nonresidential construction spending will decline between 5-8% for this year but will begin to increase month-over-month in the third or fourth quarter, returning to growth in 2022.
Another thing is for sure: technology is here to stay, as we move to a future with a more resilient, tech-enabled construction industry. As described in a previous report, the pandemic spurred three years of construction technology adoption condensed into the last nine months of 2020—and that isn’t going to slow down anytime soon.
Here is a different way to look at it. Could the fast-paced shift to technology help address some of the other challenges the construction industry faces with labor and materials? Let’s look to manufacturing, as an example. On a recent episode of The Peggy Smedley Show, Orr Danon, Hailo, says edge AI (artificial intelligence) can automate processes—thus making a manufacturer more reliant on technology than on labor. The same is true about the construction industry. Now is the time. Will you take the step toward greater automation? What is holding you back? What is pushing you forward?
Original Article: https://constructech.com/construction-outlook-beyond-2021/
