2017 construction outlook

Seventy-three percent of construction firms across the U.S. plan to expand their payrolls this year as contractors look for private- and public-sector demand to grow in all market segments. That optimism shines through in a new survey by the Associated General Contractors of America and Sage Construction and Real Estate.

Yet despite the rosy expectations outlined in “Expecting a Post-Election Bump: The 2017 Construction Industry Hiring and Business Outlook,” many firms, including contractors in Virginia, remain worried about the availability of qualified workers and rising health and regulatory costs.

“Contractors have relatively high expectations for 2017 as they predict the economy and demands for all types of construction will grow,” Stephen E. Sandherr, the association's CEO, said in a statement. “As a result of this optimism, many firms expect to expand their headcount next year.”

Association officials noted that some of these expectations are based on President-elect Donald Trump’s commitment to investing in infrastructure, improving federal health-care laws and reducing regulatory burdens. During his campaign, Trump promised to invest in America's infrastructure and to employ millions of workers to rebuild highways, bridges, tunnels and airports. “While the new administration and its stated policy objectives offer many reasons for optimism, there is a significant risk to the industry if the new Congress and administration underdeliver,” Sandherr said. “If plans to invest in infrastructure, reform health-care laws and roll back regulations are delayed, many contractors will likely scale back their plans to expand headcounts.”

Overall, respondents from nearly 1,300 construction firms in 49 states are most optimistic about the outlook for the hospital, retail, warehouse and lodging markets. Survey results from Virginia showed that contractors here expect more business in these sectors as well as warehouse and multi-family. 

Yet 59 percent of the Virginia contractors said they have a hard time filling salaried and craft-worker positions. Firms report they are increasing base pay and bonuses and/or benefits to retain or recruit qualified staff.

“Contractors remain quite concerned about labor shortages, tight margins and growing costs,” said Ken Simonson, the association's chief economist. “In particular, as additional older workers reach retirement age, firms will struggle to find qualified workers to replace them.”

Besides coping with worker shortages, contractors expressed concern about the continued increase in health-care and regulatory compliance costs. One hundred percent of the Virginia contractors who were surveyed said that the cost of providing health care for their employees increased in 2016, and 88 percent expect costs to rise in 2017.

Even as firms spend more on health care, they are prepared to increase investments in information technology (IT).  According to the Outlook, 35 percent of firms across the country say they invested at least 1 percent of their revenue in IT last year.  In addition, 40 percent say that their IT investments will increase in 2017.  However, many contractors, including those in Virginia, report having no in-house IT staff, with these functions typically outsourced.

“With competition heating up for both projects and qualified staff, construction companies are relooking at how technology can help them meet these challenges head on,” said Jon Witty, vice president and general manager for Sage Construction and Real Estate, North America. “Contractors are not only increasing their investment in IT, they are becoming more strategic about securely applying information technology to all aspects of their business.”

In Virginia, contractors said they use estimating and bidding software to obtain work, and 43 percent use social media such as Facebook and Twitter to drive their brand. Mobile devices such as smartphones and tablets are common, and more companies are using cloud-based servers/storage to enhance business operations.