Construction contractors expect increasing demand for numerous types of projects in 2022 despite ongoing supply chain and labor challenges, as most firms plan to add workers this year, according to survey results released today by the Associated General Contractors of America and Sage. The findings are detailed in Expecting Growth While Coping with the Lingering Impacts of the Pandemic: The 2022 Construction Hiring & Business Outlook.
“Contractors are, overall, very optimistic about the outlook for the construction industry in 2022,” said Stephen E. Sandherr, the association's chief executive officer. “While contractors face challenges this year, most of those will be centered on the need to keep pace with growing demand for construction projects.”
The percentage of respondents who expect a market segment to expand exceeds the percentage who expect it to contract – known as the net reading – in 15 of the 17 categories of projects included in the survey. Contractors are most optimistic about the market for highway and bridge construction, which has a net reading of positive 57%. They are similarly optimistic about transit, rail and airports projects, with a net reading of 51%, and water and sewer projects, with a net reading of 50%.
These segments all stand to see increased federal investments because of the recently passed Bipartisan Infrastructure bill. Contractors are also upbeat about demand for federal construction projects, with a net reading of 37%, and power construction, with a net reading of 29%.
The highest expectations among predominantly private-sector categories, with a net reading of 41% each, are for warehouses and other healthcare facilities, which includes clinics, testing facilities and medical labs. The outlook for hospital construction is also strong, with a net reading of 38%.
Contractors were also optimistic about multifamily residential construction, with a net reading of 32%, and manufacturing construction, with a net reading of 27%. Expectations were more subdued, however, for public buildings, with a net reading of 20%; kindergarten through 12th grade school construction, with a net reading of 19%; higher education facilities, with a 16% net reading; and lodging, with a 6% net reading. Only two categories received negative net readings, both of -8%: retail and private office construction.
Optimism about growing demand for many types of construction projects is leading many firms to plan to hire workers this year. Seventy-four% of respondents expect their firms will expand headcount in 2022, compared to just 9% that who expect a decrease. Forty-seven percent of firms expect to increase their headcount by 10% or less. However, 22% say their headcount will grow by 11 to 25% and 5% anticipate an increase of more than 25%.
Adding those workers will be a challenge, however. An overwhelming 83% report they are having a hard time filling some or all salaried or hourly craft positions, compared to only 8% who say they are having no difficulty. And three-fourths of respondents say it will continue to be hard to hire or will become harder to hire this year.
The pandemic continues to impact the construction industry, association officials noted. Eighty-four percent of respondents report costs have been higher than anticipated, while 72% say projects have taken longer than anticipated because of the pandemic. As a result, 69% have put higher prices into bids or contracts, while 44% have specified longer completion times.
Supply chain bottlenecks are also impacting construction. Only 10% of firms report they have not had any significant supply chain problems. Sixty-one percent have turned to alternative suppliers for materials and 48% have specified alternative materials or products.
Rising construction costs and slowing schedules have contributed to a significant number of project delays and cancellations. Forty-six percent of contractors report having a project delayed in 2021 but rescheduled, while 32% had a project postponed or canceled that has not been rescheduled.
“The last two years have become increasingly unpredictable, due in large part to the coronavirus and public officials’ varied reactions to it,” said Ken Simonson, the association's chief economist. “But, assuming current trends hold, 2022 should be a relatively strong year for the construction industry.”
Officials with Sage noted that firms are being more strategic about information technology as they try to remain competitive in the current environment. Sixty-one% of contractors indicate they currently have a formal IT plan that supports business objectives. An additional 7% plan to create a formal plan in 2022.
“Amid the challenges the industry faces, technology plays an essential role in keeping teams connected and projects moving,” said Dustin Stephens, vice president of Construction and Real Estate, Sage. “The past few years have highlighted just how crucial mobile and cloud-based solutions are, and we will continue to see these technologies play an integral role in helping construction firms bounce back.”
Stephens added that most firms plan to keep their technology investment about the same as last year. When asked whether they planned to increase or decrease investment or stay the same in 15 different types of technologies, the majority of respondents – ranging between 69 and 89% – said their investments would remain the same.
Association officials urged public officials to take steps to help the industry recover in 2022 and avoid measures that will undermine the sector. They noted that the Biden administration’s vaccine mandates will prompt many vaccine-hesitant workers to leave the relatively few employers covered by the orders and move to smaller firms that are not covered by the rule and employ over 60% of the industry’s workforce.
“Given how many firms are currently looking to hire, many vaccine-hesitant workers will be able to switch jobs instead of taking a shot they have already resisted for over a year,” Sandherr said. He added that the administration’s plans to increase tariffs on Canadian lumber and maintain existing ones on other key construction materials will make it harder for firms to accurately bid upcoming projects and complete them on schedule.
Sandherr said the association will continue to push for new federal investments in workforce development and make sure Congress keeps its promise to boost funds for infrastructure. He added the association would continue to encourage construction workers to get vaccinated, and is planning to release new Spanish-language public service ads on the subject later this month to accompany a series of ads encouraging vaccinations AGC released last year.
“Our ultimate goal is to make sure that contractors’ optimistic outlook for 2022 becomes a reality,” Sandherr said.
The Outlook was based on survey results from more than 1,000 firms from all 50 states and the District of Columbia. Varying numbers responded to each question. Contractors of every size answered over 20 questions about their hiring, workforce, business and information technology plans. Click here for Expecting Growth While Coping with the Lingering Impacts of the Pandemic: The 2022 Construction Hiring & Business Outlook. Click here for the survey results.
Related Stories
Market Data | Mar 22, 2017
Architecture Billings Index rebounds into positive territory
Business conditions projected to solidify moving into the spring and summer.
Market Data | Mar 15, 2017
ABC's Construction Backlog Indicator fell to end 2016
Contractors in each segment surveyed all saw lower backlog during the fourth quarter, with firms in the heavy industrial segment experiencing the largest drop.
Market Data | Feb 28, 2017
Leopardo’s 2017 Construction Economics Report shows year-over-year construction spending increase of 4.2%
The pace of growth was slower than in 2015, however.
Market Data | Feb 23, 2017
Entering 2017, architecture billings slip modestly
Despite minor slowdown in overall billings, commercial/ industrial and institutional sectors post strongest gains in over 12 months.
Market Data | Feb 16, 2017
How does your hospital stack up? Grumman/Butkus Associates 2016 Hospital Benchmarking Survey
Report examines electricity, fossil fuel, water/sewer, and carbon footprint.
Market Data | Feb 1, 2017
Nonresidential spending falters slightly to end 2016
Nonresidential spending decreased from $713.1 billion in November to $708.2 billion in December.
Market Data | Jan 31, 2017
AIA foresees nonres building spending increasing, but at a slower pace than in 2016
Expects another double-digit growth year for office construction, but a more modest uptick for health-related building.
High-rise Construction | Jan 23, 2017
Growth spurt: A record-breaking 128 buildings of 200 meters or taller were completed in 2016
This marks the third consecutive record-breaking year for building completions over 200 meters.
Market Data | Jan 18, 2017
Fraud and risk incidents on the rise for construction, engineering, and infrastructure businesses
Seven of the 10 executives in the sector surveyed in the report said their company fell victim to fraud in the past year.
Market Data | Jan 18, 2017
Architecture Billings Index ends year on positive note
Architecture firms close 2016 with the strongest performance of the year.