The industry has made a significant recovery from a recession on the back of a robust residential market in 2021, but it has also experienced multiple headwinds that are expected to persist in 2022. Rising construction costs and labor shortages persist, challenging the industry to innovate competitive new ideas, while stricter regulations contribute to a reduced margin for error and waste. Besides, labor shortages and supply chain disruptions have hit the industry hard, leading to project delays, rising costs, and further margin erosion.
The Covid-19 pandemic has disrupted the whole industry and forcing the market player to shift accordingly in order stay competitive. As the industry becomes more competitive, harnessing these construction trends will prove valuable for any market player. Check out the lists of construction industry trends for 2022 below that might inspires you at some points.
1. High demand of skilled labors
One of the most noticeable construction trends of the past few years is a vast increase in the demand for labor. Quality labor is expensive and competitive, though robots do pick up a lot of the slack.
Despite these robots’ best efforts, we will need more educated workers to manage and interpret the data produced by new technology. Fortunately, women are stepping in to fill more competitive roles. According to the Bureau of Labor Statistics, women occupy only 10.9% of construction industry jobs, and industry hiring trends show a 94% growth in female-owned construction firms from 2007 to 2018; additionally, 30% of construction companies promoted a woman to a senior position in 2018.
During the pandemic, about 1.5-million baby boomers retired earlier than had been anticipated, removing many skilled building trades workers from the industry. But it’s harder to convince young people that construction offers a good future now than it was when those recently retired workers were young.
The industry is now targeting Generation Z, born between 1995 and 2010, in recruiting efforts. In the past, negative perceptions of trade school were detrimental to efforts to hire new talent in construction. The COVID-19 pandemic caused a shift in attitudes toward alternative education options and resulted in increased positive attitudes toward trade school, positioning construction firms to show off the career growth potential in their industry and the abundant opportunities to experiment with new technologies.
2. Rising of material costs
The U.S. Bureau of Labor Statistics reported that the Producer Price Index for construction goods increased by 17% year over year in 2021. Rising interest rates are likely to compound all types of costs, resulting in further pressure on total construction. Technologies like drones, AR and BIM will be key in helping to maintain project volume and combat this cost pressure.
Innovative living materials and technology may push up costs further, even though they ultimately provide more savings for users in the long run.
The industry can also come together to form a supplier collaboration network to help bring in new sourcing strategies and reduce the current material supply volatilities. Overall, supply chain disruptions and volatility are expected to be among the biggest challenges in 2022, and the firms that can navigate through them will likely emerge as winners.
3. Sustainable Green Construction
Green construction is the expected standard for homebuyers, renters and commercial tenants. Unfortunately, many sustainable and eco-friendly features remain a luxury, despite their long-term savings — though this will change over the next decade as eco-tech and sustainable construction become more mainstream.
Renewable energy sources captured 11% of the energy market in 2019 (per the U.S. Energy Information Administration) and are only expected to grow in their share as accessibility increases. That’s a huge market, given buildings are still responsible for 40% of U.S. energy consumption and 30% of greenhouse gas emissions.
Green construction includes both the technology to lower a building’s carbon footprint and the use of resources and building models to reduce the use of resources. Perhaps an even greater driver of green building is proof of its value for occupants. Research shows that green buildings can have a positive psychological and physiological impact on inhabitants and even passersby.
Greenscaping, the practice of outfitting rooftops with plant coverings and small parks, is now commonplace in urban centers around the globe, exemplified by Google’s new multitiered London HQ. The developers deemed the project a “landscaper,” a building with similar dimensions to a skyscraper but build horizontally rather than vertically. This enables vast greenscapes to cover the structure while also improving its resistance to high-powered storms driven by climate change.
4. Modular Construction Technology
In a recent Deloitte survey, 61% of Engineering & Construction respondents indicated strategic sourcing and category management as an area they are likely to invest in during 2022. Another strategy is to develop prefabrication and modular construction capabilities, helping firms save costs and reduce sourcing complexity.
Modular and prefab construction is in the middle of a multiyear boom that isn’t showing signs of slowing down. The modular construction market, led by the residential sector, is predicted to balloon in value to almost $110 billion by 2025, driven by a lack of skilled labor and an increase in cost-cutting technology.
New technology also enables these prefab and modular buildings to grow larger than ever before. The 21-story Citizen M Bowery Hotel, opened in downtown Manhattan in 2019, is now the tallest modular construction project in the United States, and the New York Department of Housing Preservation and Development recently partnered with a modular developer to construct a new affordable housing development in East New York. Many major international builders say they plan to pare down their on-site construction activity to just 25% by 2025 in favor of prefab construction.
The prefab industry hasn’t been spared by the COVID-19 pandemic, with some manufacturers shutting down to address the shortage in large-scale, hospitality-focused modular construction. However, as a whole, off-site construction isn’t going anywhere. Modular projects offer the ability to better regulate employee safety in climate-controlled, ventilated environments, making them ideal for those who want to maintain social distancing practices.
5. Residential Project in Demand
In a recent survey by Deloitte, 91% of Engineering & Construction respondents characterize the business outlook for their industry as somewhat or very positive, 23% higher than last year. Driving this business confidence is the expected strong performance of the residential
segment and growth from the nonresidential segment due to the $1 trillion IIJA.
Residential activities continued to stay strong despite rising material prices and the spread of the coronavirus Delta variant. The segment posted record spending levels of about $770 billion in July 2021, 27% higher than last year and almost 30% higher than pre-pandemic levels. The housing segment exhibited strong growth on the back of low mortgage rates and experienced improvements across both single- and multifamily new construction. Provided mortgage rates remain at similar levels and no new variants surge, housing starts are likely to stay strong, further aiding residential segment growth in 2022.
As global investment from tech companies increases in complex megaprojects, some of the largest construction companies, like Skanska, announced that they’re no longer pursuing large transportation public-private projects, instead focusing on lower-risk arrangements.
The large-scale project downturn is already resulting in increased interest in private sector projects. Residential construction spending was up nearly 25% in 2021, and residential starts are expected to increase by 7% in 2022.
These construction industry trends are rapidly changing the global market — rising prices and skilled labor shortages are likely to continue in the coming decade, and regulatory challenges may become stricter with intense scrutiny on workplace safety and climate change adaptation. By adopting new practices, leveraging new technologies and investing in new projects, builders and developers can reduce risk, win more contracts and enjoy profitability.
2022 is expected to be another rewarding, but challenging year, and the industry looks to be poised to capture growth opportunities. Overall, 2022 is likely to be an exciting year for the industry.