Construction firms expect mixed bag for 2024, survey says

Construction firms are expecting a mixed bag for 2024, according to results of a survey conducted by the Associated General Contractors of America and Sage Construction and Real Estate, released Thursday.

Challenges facing the construction industry include labor shortages, higher interest rates and input costs and a still-struggling supply chain.

In Virginia, about 31 firms answered the survey and nationally, about 1,300 firms answered.

The biggest concerns for 2024 in Virginia are an insufficient supply of workers or subcontractors, followed by worker quality and an economic slowdown or recession. Nationally, the biggest concerns were rising interest rates and financing costs, followed by “other” costs such as trucking, insurance and design, followed by economic slowdown and recession.

“2024 offers a mixed bag for construction contractors: on one hand, demand for many types of projects should continue to expand and firms will continue to invest in the tools they need to be more efficient,” Stephen E. Sandherr, the association’s CEO, said in a statement. “Meanwhile, they face significant challenges when it comes to finding workers, coping with rising costs and weathering the impacts of higher interest rates.”

In Virginia, respondents said they expected the highest dollar-value projects they would compete for in 2024 would be data centers, water and sewer projects, and bridges and highways. Nationally, respondents said it would be water and sewer projects, then transportation, then bridges and highways.

“On balance, contractors remain upbeat about the available dollar value of projects to bid on in 2024. But the optimism regarding opportunities for most project types is less widespread than it was a year ago,” Ken Simonson, the association’s chief economist, said in a statement.

Sixty-one percent of the respondents in Virginia expected to increase their headcounts this year, with the most saying between 1 and 10%.  Nationally, 69% of those surveyed said they expect their headcounts to increase, and 47% said they expect it to increase up to 10%.

Eighty-seven percent in Virginia said they are having a hard time filling some or all salaried or hourly positions, higher than the national survey, in which 72% said they are having trouble hiring. Nationally, 35% said they think the challenges with labor will continue over the next year, but another 20% said it would become harder, while 31% expected no change. On the flip side, 13% had a more positive outlook expecting it to become easier. In Virginia, those surveyed were much more optimistic, with 42% saying it would be easy to hire, 13% saying it would become easier and 32% expecting no change.

In Virginia, 68% of the firms who answered said they increased their base pay rates more in 2023 than in 2022, just above the national survey, where 63% said they raised pay more in 2023 than in 2022.

In regard to supply chain issues, 59% in Virginia said they accelerated purchases after winning contracts, just above the national response of 56%. Just 17% in Virginia said they have had no significant supply chain problems, slightly less than the national response, in which 23% said they had no issues.

Of those surveyed in Virginia, 23% said no projects have been postponed or canceled, while 53% said projects were postponed in 2023 but were rescheduled. Another 40% said projects were postponed or canceled in 2023 but not rescheduled. Nationally, 34% said they did not have projects postponed or canceled in 2023, 37% had them postponed but rescheduled, and 36% said they were postponed or canceled but not rescheduled. Both in Virginia and nationally, the largest cause of postponements or cancelations was rising costs.

The construction industry added 17,000 employees nationally in December 2023, and 197,000 jobs for the year, the AGC reported, a gain of 2.5%, outpacing the overall job growth of 1.7 % for the overall economy.