We are a few weeks from wrapping up 2017, which provided adequate growth for the construction industry. According to the FMI Corporation, provider of management consulting and investment banking services to engineering and construction, infrastructure and the built environment, construction spending in 2017 increased 4% compared to 2016. For 2018, FMI forecasts another 5% growth over 2017. This is all great news for an industry that has suffered greatly and recovered nicely from the recession in 2008. In order to hit the ground running in 2018, let’s take a look at how 2017 construction news shape 2018.
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Hurricane Harvey, Irma, and Maria
The 2017 hurricanes season devastated the regions in Texas, Florida, and territory of Puerto Rico. With over 51 inches of rain, Hurricane Harvey set the record for most rainfall ever in the continental United States. Just one week later, Hurricane Irma made landfall in Florida damaging 90% of houses in the Florida Keys. Still without power from Hurricane Irma, Puerto Rico got hit again two weeks later by Hurricane Maria. This one completely wiped out their power grid. One month after Hurricane Maria, 88% of Puerto Rico remained without power. The three hurricanes combine creating the costliest hurricane season totaling $368 billion in damages. As residents and business owners move forward, recovery will take years. Add in the ongoing labor shortage, construction firms will be hard-strapped to keep up with recovery efforts along with new builds.
Mother Nature was not kind to the United Sates in 2017. While the South experienced torrential rains and floods, wildfires spread along the West coast targeting Oregon, Washington and California. The bulk of the damage and loss occurred in California where heavy rains in the winter led to extensive growth of brush. The summer months dried the brush creating explosive fuel for the fires. The Northern California fires destroyed 8900 structures and the Southern California fires destroyed over 1000 structures. In all, the economic toll of the 2017 California wildfires will reach at least $180 billion. Similar to the Hurricane aftermath, construction firms are dealing with labor shortages to keep up with demand to support recovery efforts along with new construction projects.
Just like Mother Nature, hackers unleased their full force in 2017. WannaCry ransomware attack, viewed as the biggest ransomware attack of all time, infected more than 200,000 computers in over 150 countries. Data breaches in 2017 occurred at many major companies this year including Equifax, which exposed the personal information of 143 million Americans. The financial impact on cybersecurity attacks will exceed $5 billion in 2017. This is troublesome for many construction companies hesitant to move their data to the cloud. Construction tech companies providing cloud-based systems will need to be extra diligent on their security to ensure their customers that their data is secure.
As one of the worst drug crisises in American history, President Trump declared the opioid epidemic as public health emergency. Every day more than 90 Americans die overdosing on opioids. The costs to healthcare, lost productivity on business, treatment, and criminal justice total $78.5 billion a year. According to a calculator developed by the National Safety Council, an Illinois-based construction firm of 150 employees could face $57,387 in lost time, turnover and healthcare expenses from substance abuse. The physical nature of construction makes construction workers at higher risk for prescription opioid abuse. Doctors prescribe opioid pain medication in order for construction workers to resume employment. This creates additional safety risks for other employees who may suffer injury due to impaired co-workers. Construction firms need to be diligent in their training, not only against illegal drugs, but also regarding prescription drug use and offer them treatment services.
Construction Technology Investments
Sitting just behind agriculture among the least digitized industry, construction is slow to adopt new process and technologies. However, with the extreme labor shortage in the industry, companies (along with venture capital market) are realizing the productivity improvements and cost savings that can be realized through technology adoption. This makes it an industry primed for disruption, which is evident in the amount of financial investment that is being made in the construction technology space. The construction tech companies received $433 million in disclosed funding across 56 deals to date this year. Construction companies will benefit greatly with new, innovative solutions as tech companies try to differentiate themselves in a crowded marketplace.
Just recently launched, Go Build America builds upon the initial success of Alabama, Tennessee, and California construction worker recruitment programs. As many construction firms struggle through a critical labor shortage, Go Build America serves to bring the entire industry together at a national level to educate and recruit new workers towards a construction career. Social media outreach combined with an improved job board aim to inspire the next generation of construction workers. In addition to the efforts from Go Build America, many construction firms are being proactive in their recruitment efforts. Firms should dedicate some time of their superintendents, foremen, and even workers to actively participate in education and outreach efforts at high schools.
2017 sets the stage for a another big year in construction. Is your team equipped with the right tools to improve productivity and take on extra projects in 2018?