Last year was a banner year for post-recession construction activity – a tough act to follow into 2016, given mounting costs. While construction growth is expected to remain strong this year, its pace will be tempered compared with the record pace we saw in 2015, according to JLL’s latest report on U.S. non-residential construction.
Our research uncovered some key indicators of a stable-but-slow 2016, including a third-quarter decline in construction backlog across all regions except the South that, combined with an overall 8.5-month average construction backlog across the country, indicates an impending decline in activity. Also, the development companies surveyed in the report agree that activity will remain stable in 2016, with a chance of decline in second half of the year.
Why the expectation of slowing momentum? Increasingly, construction growth – and, in particular, the talent needed to achieve it – doesn’t come cheap.
Short on Talent, High on Wage Costs
Construction costs are hiking up across the board, mostly because of glass and labor shortages. While a decline in prices for steel has been welcome, sheet-glass prices have risen sharply, a direct blow to office and high-rise residential construction budgets.
Meanwhile, the challenge of finding skilled construction talent continues to escalate. A recent survey found that 86 percent of contractors have trouble filling hourly craft professional positions, with carpenter positions rated as most difficult to fill.
At the same time, construction employment grew by 4.2 percent in December, outpacing overall employment growth by 4.0 percent. And when good talent is hard to find, it is little wonder that labor costs are higher than they have been in a decade.
Despite these costs, there is ample opportunity for meaningful growth – when developers strike the right mix of market and sector.
NAIOP Charlotte's Blog 
Leave a comment