Every year the Advancing Preconstruction conference is an impressive event with speakers from across the industry who are on the leading edge – and sometimes bleeding edge – of all things construction. It’s an opportunity to sample thought leadership and visionary predictions, and identifying common themes is a good way to get a pulse check on where we’re headed.
This year Epsilon’s Paul Kirchhoff and Jeffrey Johnson were speakers and attendees, and they brought back several insights from the conference.
Construction Demand
Construction demand overall should remain strong for the next 18 to 24 months, however, that strength will be largely focused in several specific market segments. Those include mega-projects, such as support for the growing electric vehicle and semiconductor manufacturing space; data centers; pharmaceutical R&D/manufacturing; and health care. Other markets will likely experience shrinking demand and fewer opportunities.
Inflation Creates “Fake” Growth
With inflation negatively impacting industry related costs at double-digit percentages per year, companies need to measure growth in volume instead of revenue. Simply looking at revenue as an indicator isn’t enough. For example, a company that grew revenues 10 percent year-over-year in an environment of 10 percent inflation actually didn’t grow at all! This understanding is especially important when considering how to grow our teams. More than one thought leader suggested that companies should not hire for revenue growth – they should hire for volume growth. Doing otherwise could lead to being overstaffed.
Labor Challenges
The industry struggle with labor is actually two-fold. We all see the obvious issues with labor availability as aging trades retire and leave the workforce. But labor productivity is as much of an issue – since those aging trades are replaced with younger workers with significantly less skill and experience. The double-hit to both availability and productivity is causing significant issues routinely seen in mobilizing field teams to meet demand.
First Cost vs Tomorrow’s Capacity
This line from the VP of Preconstruction at a Top-50 Construction Management firm came during a panel discussion on strategies to overcome supply chain volatility: “Worry less about first cost today – worry more about locking in capacity for tomorrow.” The takeaway? All team members will have capacity restrictions – even traditional field-based trades. But it’s even more important when a team is considering Off Site Construction – since factory capacity is a perpetually finite resource, and is becoming increasing spoken for as the industry figures out how OSC can de-risk complex projects with schedule and labor constraints. So think creatively about how to engage strategic partners early, to lock-in valuable capacity!
These are a few of the most compelling takeaways our team brought home from the conference. We’d love to hear your thoughts on these and other industry forecasts. Contact the Epsilon team to share your questions and feedback, or to talk about your project.
