Whether on the job market or curious about the industry, knowing the trajectory of the construction market is a valuable tool for any future leader. From our unique vantage point of working with construction companies and skilled workers, we are consistently watching Residential and Commercial construction data.
Understanding the markets where we work helps us get better at anticipating needs. It may, in fact, help job seekers and hiring managers do the same.
Market 1: Residential Construction Update
Using data released on May 16 from the Census, current trends in residential construction are a mixed bag of slow growth and expanding backlogs.
Single family home construction growth is sagging with privately-owned starts down 4.3% (seasonally adjusted) relative to last year. Interesting, though, is that homes authorized but not started rose from April of 2018 by 3.3%.
This trend is directly linked to the ability for builders to hire, train and retain top-notch talent in order to get their backlog of projects off the ground.
Call-Out: Multifamily Construction
A segment of the residential construction market that we watch closely is the construction of multifamily housing. Census data indicates growth in completions and backlog. Multifamily starts are up 1.4% on a year-over-year basis. There is a 38% jump in units authorized but not started (ie: the backlog). It’s no wonder the backlog of projects is growing – completions of multifamily units are down by 14.2% from this time last year.
Hiring more skilled labor is one issue, but experts point to others in accessing how to tackle the imbalance in completions and authorizations. January’s issue of Multifamily Executive suggested that worker productivity is a contributor – by their measure, amounting to “20% to 35% of construction input costs.”
Given the data, it is very clear that construction companies absolutely need more productive workers to satisfy their customers’ demands. Hiring great skilled labor and providing reasons to keep them around is a critical business strategy to compete.
Market 2: Commercial Construction Update
Heading into 2019, a consensus seemed to form around moderate growth for the commercial construction market given some key staffing and material cost challenges. The growth was slated to be, on average, about 6% for 2019; and the market seems to be working around that number to date.
The story behind the numbers, though, is where that commercial business is coming from.
Call-Out: Data Centers explosive growth
The need for data centers may be the commercial construction theme of the next decade. Estimates are mind-numbing as the demand for internet-based services grows in every domestic community and with every new device requiring connectivity.
In a release on April 18th, in fact, the latest Market Future Report estimated a compounded annual growth rate for data center construction of over 9% from 2018 to 2023. Other reports have placed this rate at nearly 30% from a 2017 baseline.
No matter the number, the article further highlights the need for skilled construction. Workers are particularly important to these projects as they often require advanced sustainability and use the most energy efficient technologies on the market.
Data centers provide huge opportunities for construction companies if they can find the skilled labor that can meet the high tech demands of these sophisticated customers. The names buying space are big and capital-rich – Amazon Web Services, Microsoft and others you might guess. Additionally, the US market is only one piece of the pie – the market in the Asia-Pacific region is estimated to grow almost 33% faster.
The numbers are important and, often, write the introduction to the story. The real meat of the book, though, is in the actions the numbers drive.
So, what should all these numbers tell you?
First, hiring workers is critical. This is not news. We’ve seen demands for quality, skilled laborers continue to outpace applicants for several years. For hiring managers, you’ll have to dig deeper into the pool of available job seekers and, potentially, look at your pay ranges and benefits packages again to remain competitive. Job seekers, on the other hand, should tailor their job searches to the places that need them the most – those markets slated to grow.
Next, given the backlog the data describes and the pace of job seekers entering the market, the struggle to find great talent will not, likely, be going away anytime soon. Let’s stop lamenting the labor shortage and start being creative about solving our piece of it.
Finally, this data and the stories it tells are great news – for the companies we work with, the hiring managers we help and the applicants we place. Markets are growing! Customers are demanding work from all of us.
You don’t have to shift through pages of statistics to celebrate the over-arching headline reading, The Future of Construction is Bright!
Need help devising a strategy to hire, retain and train the right people? Contact Goliath today!