Chicago Construction News staff writer
Construction contractors have a mixed outlook for 2024, as contractors struggle to cope with significant labor shortages, impacts of higher interest rates and a supply chain that has improved, but is still “far from normal”, according to survey results the Associated General Contractors (AGC) of America and Sage.
“2024 offers a mixed bag for construction contractors: on one hand, demand for many types of projects should continue to expand and firms will continue to invest in the tools they need to be more efficient,” said Stephen E. Sandherr, AGC chief executive officer. “Meanwhile, they face significant challenges when it comes to finding workers, coping with rising costs and weathering the impacts of higher interest rates.”
The majority of respondents expect the available dollar value of projects to expand for 14 of the 17 categories of construction included in the survey. However, a smaller number than previously expects the markets they compete in to expand in the coming year.
The highest net positive reading in the 2024 survey—32 percent—is for water and sewer construction. That category nosed out last year’s leading segments, highway and bridge construction and transportation projects such as transit, rail and airports. And the net reading for federal projects is 29 percent. The highest expectation among predominantly private-sector categories is for power projects, with a net reading of 25 percent.
There are four market segments for which respondents are closely divided between favorable and unfavorable outlooks or have negative expectations on balance. There is a net positive reading of 4 percent for multifamily residential construction. Expectations are bearish for lodging, with a net negative reading of -3 percent; retail construction, -15 percent; and private office construction, -24 percent.
“On balance, contractors remain upbeat about the available dollar value of projects to bid on in 2024. But the optimism regarding opportunities for most project types is less widespread than it was a year ago,” said Ken Simonson, the association’s chief economist. Click here to watch a quick video about the results.
Simonson noted that more than two-thirds (69 percent) of the respondents expect to add to their staff, compared to only 10 percent who expect a decrease.
However, seventy-seven percent of respondents report they are having a hard time filling some or all salaried or hourly craft positions. The majority (55 percent) expects that hiring will continue to be hard (35 percent) or will become harder (20 percent).
Most firms took steps in 2023 to attract and retain workers. Sixty-three percent increased base pay rates more than in 2022. Additionally, 25 percent of firms provided incentives or bonuses and 24 percent of the firms increased their portion of benefit contributions and/or improved employee benefits.
As in the past two surveys, nearly two-thirds of respondents say projects have been postponed or canceled. Almost equal percentages of firms report projects were postponed or canceled in 2023 and not rescheduled (36 percent of respondents) as report projects were postponed but rescheduled (37 percent). Ten percent have already experienced postponement or cancellation of a project that had been scheduled for the first half of 2024.
Only 23 percent of respondents say they have not had any significant supply-chain problems. However, sixty-four percent noted that rising interest rates or financing costs are one of their biggest concerns for 2024, while 63 percent listed insufficient supply of workers or subcontractors and 62 percent are worried about the likelihood of an economic slowdown/recession. In addition, 58 percent listed rising direct labor costs (pay, benefits, employer taxes), while 56 percent pick worker quality and 54 percent list materials costs as major concerns for the year.