Top 4 Construction Trends in 2022
The construction industry had a very successful year in 2021, despite a global pandemic that inflicted supply chain and skilled labor obstacles, inflated cost of materials, and more. As the world continues to transition back to “normal”, many are curious about how long this triumph will last.
That’s why our President Alan Ferguson analyzed industry data to determine the top 4 construction trends that will influence success in 2022. Let’s dive into those topics, which include housing demand, skilled labor, supply chain matters and inflation.
1. Housing Demand
Most of us have interacted with the housing market in some way, as the pandemic altered how we live and utilize our homes. After a strong but tumultuous year for the construction and builders risk market, data indicates housing demand is moving back into balance.
Market sectors that struggled last year are seeing a positive change. Schools across the country have welcomed back students for in-person instruction, and businesses have taken a similar approach with more employees back in their offices. In addition, travel ramped up considerably in 2021 and should attribute to the revival of the hotel market in 2022.
Residential construction continues to thrive. In November of 2021, we saw the most single-family homes under construction in over a decade! More multifamily buildings (with 5+ units) are currently under construction since 1974. With the Housing Market Index (HMI) at near record levels and investor spending on the rise, this demand drives our confidence leading into Q1 2022.
2. Lack of Skilled Labor
Construction job openings jumped to record highs in October 2021. This mass exodus of skilled labor can be dated back to the Great Recession. Difficulties finding qualified workers has thrown project schedules into disarray, leading to delays and uncertain completion timelines. This means businesses can anticipate building obstacles for the foreseeable future.
However, the absence of a government stimulus and increased wages should incentivize people to return to work. The Employment Cost Index (ECI) for construction workers, which measures total compensation, increased by 3% year-over-year in Q3 2021. Less restrictive immigration controls should also help augment the supply of labor.
3. Supply Chain Issues
Construction remains constrained by supply bottlenecks. Global supply chains are in knots after halts from the Pandemic. As the world economy bounces back, the cost of building materials is expected to decrease and shortages will begin to subside.
Despite these pitfalls, supply constraints appear to be easing slightly as winter slows construction projects in cold areas. In addition, distribution methods are holding strong after the holiday spending spike. Less congested transportation channels should foster the movement of building materials and other freight. In addition, the increase in available COVID treatments and vaccines should help keep the labor force protected.
Short-term benefits exist for the construction market as long as demand persists. However, the impact of inflation on housing is hard to measure. The demand for housing is always there, but the primary sector of demand shifts regularly. The problem is rooted in the aftermath of the Great Depression, where millions of Americans lost everything, including real estate. The solution is rooted in the massive demand for housing.
Typically, housing is not part of the Construction Price Index. The Case Shiller Index, which is the leading measure of U.S. residential real estate prices, saw an 18.8% annual gain in November 2021. Phoenix, Tampa, and Miami are experiencing the highest year-over-year gains, ranging from 27 to 32%. Eleven out of 20 cities reported higher price increases in the year ended November 2021 versus year ended October 2021. Short-term mortgage rates remain stable and at a historically low rate.
Overall, the numbers indicate that housing demand is here to stay. The builders risk insurance and construction industries are bullish on 2022, and experts believe that an infusion of demand and skilled labor will win over all obstacles.