Construction Business OutlookHighlights Concerns, Growth

February 2016

Sage Construction and Real Estate teamed with the Associated General Contractors of America to combine Sage’s IT insights with AGC’s annual “Construction Hiring and Business Outlook” report. Conducted in November and December 2015, the “2016 Construction Hiring and Business Outlook” received responses from more than 1,500 contractors from across the United States and provides in-depth analysis of market trends, hiring patterns and IT practices. Here are a few highlights:
    
Contractors are generally optimistic about 2016 and expect a mix of private and public sector segments will drive demand. Retail, warehouse and lodging are the top three segments expected to expand, followed by hospital, private office, multifamily residential and higher education construction. Respondents also expressed greater optimism this year for the construction of K-12 schools and public buildings.
    
Seventy-one percent of firms plan to increase their headcount. While most contractors are looking to hire, they are less ambitious than in 2015 when 80 percent of construction firms were planning to expand their staff. According to AGC Chief Economist Ken Simonson, one factor that appears to be affecting hiring plans is the continued shortage of qualified workers. In fact, 70 percent of firms report that they are having a hard time finding both salaried and craft professionals. Most (69 percent) predict that labor conditions will remain as tight, or get worse, during the next 12 months.
    
Contractors are responding to the worker shortages by increasing pay, benefits or both. Forty-nine percent of survey respondents say they have increased base pay rates, 30 percent report they are providing incentives and/or bonuses, and 23 percent have increased their contributions to employee benefits—all to retain or recruit workers. An additional 15 percent say they are considering increasing pay and/or benefits in the near future. Plus, nearly half of firms plan to increase their investment in training and development in the coming year.
    
Firms are increasing their investment in information technology. According to Jon Witty, vice president and general manager of Sage Construction and Real Estate, contractors faced with labor shortages have the alternative of finding ways to do more with their current staff. “It’s not surprising that contractors are increasing their investment in IT as a way to achieve higher productivity,” he says. Forty-two percent of firms surveyed report they are currently spending 1 percent or more of revenue on IT, a 10 percent increase over the past two years. In addition, 41 percent plan to further increase their IT spending in 2016.
    
Labor, competition and regulations are top concerns. When asked to identify their biggest business concerns, respondents listed worker shortages (52 percent), worker quality (45 percent) and rising direct labor cost (40 percent) as top on their list. Forty-three percent also identified increased competition for projects, as well as growth in federal (39 percent) and state and local (34 percent) regulations as major challenges.
    
This year’s survey indicates that the industry will continue to recover in 2016, although not without a number of challenges that have the potential to dampen, and possibly even undermine, the sector’s recovery, says AGC Chief Executive Officer Stephen E. Sandherr. “In other words, 2016 won’t be easy,” he says, “but should definitely be a good year for many construction firms.”