6 Construction Industry Trends in 2023

Each year brings new challenges in the construction industry for companies of all sizes. While we cannot know exactly what is going to happen in the next six months, let alone next week we can evaluate industry trends to help determine how they may affect your construction business and prepare you for the year ahead.

Construction Industry Trends to Watch

1. Increased but unsteady demand
   According to the Associated Builders and Contractors, 2023 is projected to have increased but unsteady demand for the construction industry. Through their research, it is forecasted that construction spending will increase and many companies already have 8-11 months’ worth of backlog. This is consistent when looking at specific industries, regions or company sizes. However, it’s important to note that a strong backlog in 2023 does not necessarily mean the economy will be strong.
   
   In the U.S, the south will most likely hold steady due to growth in population, while the northeast has the largest potential for a slowdown due to higher labor wages and a larger number of union members which is driving up prices. However, the Federal Infrastructure Investment and Jobs Act and the Inflation Act that we discuss more in this article, should soon bring projects to fruition across the country.
2. Increased need for construction technology
   Construction companies have been adapting to recent challenges in the industry including labor shortages and supply chain issues. Many companies have been turning to construction technology to increase performance. Some technology advancements are limiting the amount of physical labor and filling in for the lack of skilled laborers.
   
   Other technology, like Deltek ComputerEase, is helping businesses get into the nitty-gritty details of their jobs, productivity and performance. Moreover, construction technology will help attract new hires, especially the younger generation entering the workforce.
3. Elevated risk of cyber threats
   When it comes to cyber threats the construction industry ranked #2 in the number of ransomware cases in 2022. These crimes don’t just happen to large companies—small- and medium-sized contractors are especially vulnerable and often fall victim to ransomware.
   
   Since there is and will continue to be a demand for construction technology, the risk of cyber threats will increase. It’s important to put in the time and money to ensure you are doing everything possible to avoid risk, such as enabling two-factor authentication, using strong, uncommon passwords and moving your data to the cloud.
4. Impact of the Federal Infrastructure Investment and Jobs Act will be evident
   In November of 2021 President Biden signed the more than $1 trillion infrastructure bill. The idea is to put $550 billion into transportation, broadband and utilities, $110 billion into roads, bridges and other major related projects, $66 billion in freight and passenger rail, $39 billion into public transit and $55 billion into replacing lead pipes to improve water systems.
   
   While the bill passed in 2021, so far less than 5% of contractors have seen bidding activity on projects through this bill. However, it is expected that in 2023 and 2024 contractors will see more projects funded by this bill to bid on.
5. Increase in green construction
   Green construction, according to the Bureau of Labor Statistics, is “the practice of erecting buildings and using processes that are environmentally responsible and resource-efficient.” These buildings conserve energy and water and are typically constructed from recycled or renewable materials, limiting their environmental impact on the world. Green construction has been increasing over the last few years, and with the recently passed Inflation Reduction Act, it will continue to grow across the country and into different market sectors than we have seen before.
6. Shortage of skilled labor
   The construction industry continues to face a workforce shortage. In 2022 the industry needed to attract about 650,000 workers in addition to the normal hiring pace needed to meet the labor demand. This shortage will continue to grow in 2023, as many skilled laborers are retiring and exiting the workforce. In order to keep up with demand, it’s important to invest in education and training for your workers as well as look at your company culture, incentives and bonus pay. To help combat the shortage you should also focus on hiring more women and minorities, as they are underrepresented in the construction industry. As Gen Z enters the workforce and wages and competition increases, it’s the industry’s responsibility to educate them on opportunities in construction. Paying attention to these important aspects of your business and the industry will help attract and retain employees and keep your business competitive.

How to Respond to Construction Industry Trends

Staying proactive and adapting to the changing market is essential to keep your construction business afloat. Below are some tips to help stay current and competitive.

• Use construction accounting software to figure out and track your productivity rates
• Focus on marketing and business development so you can maintain a strong backlog
• Invest in education, training and labor-saving technologies for your workers
• Review your company culture, incentives, benefits and bonus pay to help attract and retain employees
• Partner with industry organizations for training, education and exposure