Looking ahead to 2017 construction companies can expect improved growth in transportation requiring more work on roads and bridges as infrastructure continues a decline into disrepair.

Federal funding has been considerably less over the last 10 plus years but as the new administration rolls into office we can expect to see a review of federal regulations and a possible increase in monies devoted to transportation.

With expected improvement, there are some additional areas, which, in time, affect the growth of construction.

Drone for Construction

Technology 

Construction companies will feel pressured to find ways to reduce operating costs. One method is to use drones, whose purpose is to survey and area and gather data and visuals that will translate in time efficiency and reduced labor costs.

Another innovative tech product is a wearable for construction workers. The wearables include helmets with virtual display visors, vests with a GPS component and augmented reality devices that place a virtual object in the real world.

This feature allows the worker to see an expected layout that is not present at the time he/she is looking.

 

modular home

Changing Living Styles

Modular, communal living (co-living), yurts, micro-apartments, and tiny homes are surprising new trends in living styles. The cost of home ownership has gradually been changing to an experience-oriented lifestyle which sheds the idea of having a single-family dwelling.

In other words, cost savings found in living on a smaller scale translates into a preference for quality life experiences due to cost savings.

What was once a predominantly house driven market is now a market of people who prefer alternative living styles. This means that construction companies will need to diversify and alter the products that they offer.

Modular homes seem to be the most popular option.  These are prefabricated at the manufacturing factory.

These homes are super cost effecient as it has cut labor costs, reduced the amount of wasted material and provided an affordable eco-friendly option.  In addition to modular home, tiny homes has become another perfect alternative.

There are many creative building options for these 400 sq foot homes, such as a shelving track system, retrackable walls and building a sleeping space above the room.  These homes are perfect for cost savings, creating an environmentally friendly home and living in a beauitfully creative space.

 

labor shortage

Labor Shortage

In 2007, at the beginning of the housing recession, construction projects began a slow decline and skilled labor had difficulty finding work. Over time this resulted in an aging workforce, which now has an average age of 40 and not considered hireable due to the physical demands of the job.

In addition, skilled workers do not want to return to construction because of the previous period of hardship due to lack of jobs. The challenge is to provide opportunities to younger workers while still using the expertise of the older experienced ones.

Discovering that many older workers are retiring, it has been difficult to find younger skilled workers.

"The Associated General Contractors of America, a leading organization representing more than 26,000 construction firms, recently conducted a national survey of 1,358 construction companies and discovered that a staggering 86% have difficulty filling key salaried positions. And of the 21 different trades surveyed, the top eight toughest-to-fill jobs included: carpenters (73%), sheet metal installers (65%), concrete workers (63%), electricians (60%), equipment operators (58%), roofers (56%), masons and plumbers (tied at 54%)."  Per an article from Jobsite.

Increasing Costs of Materials and Labor

Construction experienced a 2% increase in cost in 2016 and the expected increase for 2017 is between 3-4%. The change is due to a labor shortage and higher wages in a tight market.

Costs of products have increased such as gypsum, wood, asphalt paving, concrete block, and fabricated steel. Regulatory requirements are another cost factor since this adds almost 30% to the single-family home during construction time. 

With the increase in costs, builders are finding it hard to obtain credit from suppliers. As of 2017, there has been uncertainty regarding the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Builders are seeking alternative financing.

Express Capital has provided tailored working capital loans for material and labor, to help builders take on new projects with confidence. 

 

Federal Reserve Building

Lack of Federal Funding

The Fixing America's Surface Transportation (FAST) Act, signed into legislation in December 2015, is a five-year plan to improve the infrastructure of our roads and bridges. The FAST Act was implemented to provide long-term funding to states which would ensure the future of improvement in our infrastructures.

In 2017, we expect to have an increase of 45% in freight on our highways and those needs must be met with the certainty of funding. Although, with the recent change in Congressional leaders, this part of the overall Federal budget plan may stand to lose ground.

In the 2018 budget proposal for spending on infrastructure, Trump has proposed $200 billion for direct federal spending. The American Society of Civil Engineers has noted, that to fix the United States bridges, highways and other publish assets, it will cost a total of at least $4.6 trillion. 

Overall

Construction in 2016 had a slow but steady growth and the same is expected for the new year. Homeownership declined in proportion to the growth of construction but there are promising signs for increased growth in public projects, healthcare, alternative living styles, and multifamily projects.

In 2016, lenders were more favorable towards multifamily developments, sustainable development, and manufactured homes. These types of properties tend to have more of a profit margin and considered less risky in an already risky market.

Being aware of all the factors that come into play when looking at a construction project is advisable. When you are ready to bring your project to the table we are here to help you at Express Capital.

 

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Recommended blogs you may want to read

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