Despite an overall weaker global economy, 2015 finished strong for the commercial construction industry and inspired hope for continued momentum through 2016. In October 2015, Associated Builders and Contractors (ABC) had projected a total non-residential growth of 7.4% between 2015 and 2016, as well as a 2.6% increase in non-residential construction employment for 2015. Though 2016 has presented a slightly slower growth trend, the outlook for 2017 still appears cautiously optimistic, especially in a few particular sectors. Here, we discuss these trends and what it means for the year ahead.
According to American Institute of Architects (AIA), revenue for five consecutive months in the first half of 2016 had been solid. The Architecture Billing Index (ABI), a monthly survey report compiled by the AIA acts as a barometer for future trends and is a leading economic indicator for non-residential construction activities. The ABI reported a score of 52.6 in June 2016; a score over 50 indicates that firms are overall experiencing an increase in billing activity over the previous month. July dipped slightly but still remained over 50. Analysts were confident that with the five straight months of increased billing activity, this guaranteed a steady stream of construction projects in the pipeline.
However, August dipped to 49.7 and September slightly further still at 48.4 (October has not yet been released). Scores below 50 indicate a decrease in billing activity, suggesting a slowing of proposed projects. It’s too early to call a solid trend, but analysts will certainly keep an eye on this. Despite this softening in billing conditions, the AIA reports design contracts are still on the rise, countering some apprehension and implying more billings on the horizon.
Forecasting 2017 Trends
Though spending in the commercial & industrial sectors increased 9.5% year over year from January to June 2016, the projected increase in commercial spending from 2016 is predicted to increase by 6.5%, which is only about half of 2015’s gains. This lower projection is due in part to the expected slowdown in office construction for next year.
Nonetheless, the institutional sector in particular is expected to experience significant growth in 2017. Spending in this sector is up 3.2% year over year for the first half of 2016. Specifically, construction for health care rose 2.2%, and for education, it increased 6.2% in that same period. The boon for the healthcare sector is the nation’s aging population. As the large Baby Boomer population continues to move into their 60s and 70s, there will be more demand for construction and provisions in the healthcare sector. AIA analysts even predict a potential doubling in health care construction spending, from 2.3% in 2016 to 5% in 2017.
The employment forecast is a mixed bag, with numbers that initially sound promising, yet deeper analysis reveals potential challenges for the future.
The Bureau of Labor Statistics (BLS) reports an increase of 3.4% year over year from September 2015, which is 23,000 new jobs in the construction industry. This puts total employment at around 6,669,000 in September 2016, the highest seen since 2008. However, the Associated General Contractors of America (AGCA) offers a caveat that even though employment rates for the industry are at an eight-year high, finding highly qualified, skilled workers is still a challenge. Nearly 70% of companies surveyed struggle to fill positions for hourly craft positions and predict an even greater challenge for 2017. Because these positions are currently difficult to fill, 48% of the companies surveyed by the AGCA are offering higher wages.
Still, companies should look into creating more incentives for these positions. As the Millennial generation continues to surpass Gen X-ers in the workforce, work values are changing, and companies need to position themselves and better strategize in order to attract the highly skilled workers necessary to accommodate growth. Read our previous blog, Millennials in Construction: Understanding Their Role in the Future’s Industry as well as Mind the Gap: Finding Harmony in the Multi-Generational Workforce for more insight on these changing workplace dynamics.
ESG and You
For both companies and workers alike in the construction industry, it helps to have a trusted industry-specific recruiter by your side to assist in strategizing the best move forward. Industry specific recruiters intimately know the climate and ongoing trends, and can help companies evaluate whether their culture, mission, and incentives are enticing enough to attract the type of high- quality employee they need. Additionally, industry-specific recruiters who specialize in regional and local reach have well-established connections in the community, greatly benefitting the job-seeker. These types of recruiters are invested in matching highly qualified candidates with the right company, whether they are actively seeking work or passive candidates who are content with their current role, but open to other opportunities.
Electrical Search Group is an industry-specific recruiter connecting highly qualified electrical construction candidates to commercial and industrial contractors. For more information, explore our website, or visit our contact page to reach out to us.