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Growth in construction workloads continues to accelerate with firmly positive expectations

by Lisa Pollinger
August 12, 2021
in Development & Infrastructure
RWES RWES RWES

Growth in construction workloads continues to accelerate with firmly positive expectations : RICS Global Construction Monitor, Q2 2021, U.S.

  • Construction activity is on the rise
  • Materials costs and skill shortages continue to escalate
  • Momentum builds for private construction and public infrastructure

The Q2 2021 Construction Monitor results show activity gaining velocity over the quarter, as all sectors continued to grow at the aggregate level following the pandemic. What’s more, forward-looking indicators strengthened again in Q2, with respondents now anticipating greater momentum coming through for private non-residential and commercial workloads alongside solid growth in infrastructure projects. However, rising cost pressures and skills shortages are becoming more prominent features of the market and could impede activity if they continue to worsen.

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Construction activity on the rise

US construction activity has been on a clear upward trend since Q4 of last year. During Q2, sentiment has continued to become even more positive for the future outlook. Driving this pickup, respondents across the US cited positive growth in workloads across all sectors, with the US leading the region overall in outlook. In particular, infrastructure showed a drastic improvement in sentiment since last quarter from neutral to overwhelmingly positive, while private commercial construction turned around from firmly negative to highly positive. The change in outlook has been drastic.

Looking ahead, 12-month expectations point to solid growth in construction output throughout the region in aggregate across all sectors covered. Furthermore, employment prospects within the industry appear to be strengthening, with 44% more survey participants now anticipating an increase in headcounts over the coming year. Likewise, contributors foresee a more positive trend in profit margins coming through.

Pressure on material costs and skill shortages escalating

In keeping with feedback from the rest of the world, an increasing share of respondents point to the

cost of materials as a constraint on activity at the present time, with 86% drawing attention to this issue. Alongside this, shortages in labor and skills are also key challenges, particularly in the US, with more than three quarters of respondents reporting a shortfall in these areas (much higher than the global average). A strong majority of respondents report the most acute shortfall to be across skilled trades, while around half cite a lack of quantity surveyors and managers.

Tender price forecasts upgraded but still outstripped by cost projections

Across the Americas in aggregate, tender price forecasts went slightly up in Q2, but costs are now also forecast to rise at a sharper pace than previously predicted. Total construction costs are now seen increasing by 9%, with material costs set to drive the bulk of this rise and labor costs likely to contribute. In fact, overall construction cost forecasts are most elevated in the Americas compared to all other world regions 

Simon Rubinsohn, RICS Chief Economist, noted, “The US construction industry does now appear in full recovery mode according to the Q2 RICS Construction Monitor. Although the private residential sector has been leading the way so far this year, the latest feedback suggests the upturn in workloads is beginning to broaden out. Looking forward, infrastructure is viewed as likely to be the most buoyant area of activity underpinned by the huge Federal stimulus program. This is likely to be accompanied by a significant jump in headcount as the industry gears up to meet the higher level of demand.

“That said, shortages of labor in general and of specific skills in particular comes through loud and clear in the survey with both being reflected in expectations for higher wage costs. This coupled with the ongoing issues around the sourcing and pricing of building materials suggests that the hoped for recovery in profitability, signaled by contributors to the survey, may take a little longer than envisioned to materialize.


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