RICS : Strong infrastructure growth driving construction activity and optimistic industry outlook
- Profit margins showing increasing optimism
- Supply chain and labor market shortages remain impediments to growth
- Residential workloads remain buoyant while non-residential work likely to gain steam despite market challenges facing office and retail
US RICS Construction Survey – Q3 2021
The latest GCM results from respondents based in the United States remain generally positive, with forward-looking sentiment overall slipping slightly amid recent public sector uncertainties, but the picture is still consistent with an upbeat trend, particularly as Biden’s infrastructure spending bill is set to move forward.
Infrastructure continues to play a key role in driving activity and optimism. While workloads in this sector are already growing relatively strongly, the forward-looking metric is pointing to an acceleration in activity in this area as well, helped by government support. Equally striking is that while residential workloads are viewed as likely to remain buoyant, the picture around non-residential work is also seen as likely to gain momentum despite the structural challenges facing both the office and retail sectors.
Material supply and labor skills remain headwinds
Respondents in the US are continuing to highlight concerns about both the availability and the cost of building materials, with approximately 90 percent of contributors identifying this as an issue. Additionally, the strength of the pick-up in activity has also exacerbated the issue of sourcing labor in general, as well as accessing specific skilled workers.
While expectations around recruitment over the next 12 months are strong an businesses will be looking to increase headcounts to ensure they have capacity to meet demand, concerns are being expressed about whether the pool of labor is sufficient to meet these ambitions. Skilled trades are viewed as a particular problem area with nearly 67 percent of respondents from the US highlighting this. More than half of those contributing also noted shortages regarding quantity surveyors.
Positive feedback on profit margins, but work costs balance out gains
Forward-looking sentiment continues to become increasingly positive in the US for profit margins. However, there are also expectations that construction costs will outpace likely increases in bid prices. Building materials are predictably viewed as being a key source of upward pressure on costs through the course of the forecast period, estimated to rise by approximately seven percent.
Simon Rubinsohn, RICS Chief Economist, said:
Although the residential sector has been driving construction activity for much of this year, feedback to the RICS survey does point to infrastructure workloads picking up speed over the next 12 months as the stimulus program promoted by the president begins to take shape. However, a strong theme in the responses is the challenge presented by the rising cost of materials and securing the skilled labor for the industry to thrive. Significantly, contributors to the survey continue to project a faster rate of growth in construction costs than tender prices, highlighting the difficulty in rebuilding profitability at an aggregate level.
*RICS is working as part of an international coalition of organisations and professional bodies to publish the world’s first carbon accounting framework – known as ICMS3 – which will set out how the sector can move towards more sustainable practice. This framework will be published in the coming months.
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