The historically low US unemployment rate will shape the industry in 2018 and beyond, according to JLL.
The US unemployment rate now hovers at around 4.5%, the lowest in many years, and the recent construction labor shortage continues to deepen across the nation, according to the latest government report. This workforce has not grown significantly during the last nine months, and researchers see no sign of an increase. Therefore, industry professionals expect wages to increase at a faster rate. Furthermore, they believe many builders will begin using new construction technologies to offset that challenge.
Despite the headwinds, commercial real estate kept expanding in the third quarter, according to a new report from JLL that tracks national construction trends. Construction spending was up 1.9% over 2016 levels and contractor and subcontractor work was also up 1.4%.
“The construction industry remains strong, but the volume of incoming workers has come close to a halt,” says Todd Burns, president, JLL project and development services. “There are new technologies within reach that will improve productivity, enhance worker safety and create higher quality buildings for the future.”
JLL points to several recent innovations that could have a profound impact on builders’ efficiency and productivity in 2018 and beyond.
A central Building Information Modeling platform, for example, provided by companies like AutoDesk and GRAPHISOFT, facilitates the use of 3D printing, cloud-based collaboration, robotics and artificial intelligence. “Gathering, storing and analyzing large sets of data has become increasingly easier and cheaper over the last several years,” according to JLL. “Big data and AI is already being used to drive autonomous equipment, track and optimize worker positioning and schedule materials delivery – all working towards more efficient and timely job sites. “
And JLL believes an increasing number of general contractors will turn to prefabrication and offsite construction facilities to create buildings with semi-skilled labor in safe, weather-controlled environments. The use of such prefabrication facilities now allows contractors “to tackle everything from individual walls, to fully built bathrooms and offices offsite.”
“As a whole, the US economy has seen consistently strong growth over the past eight years, demonstrating that commercial real estate does not require rapid economic growth to perform well,” adds JLL. “If the economy continues to follow its current trajectory, growth will continue for the next 12-18 months.”
Topline construction spending keeps increasing, but consecutive quarters over past years show smaller and smaller gains, pointing to a tapering growth curve. And while the volume of new ground breaks for large scale private projects have begun to scale back due to the long-term nature of the timelines, renovation and fit-out work demonstrate continued strength, which will prevail into the next several quarters and beyond.
“Lenders are seeing less interest in large scale development loans as developers begin to look more cautiously at the future,” says Mason Mularoni, senior research analyst, JLL project and development services. “Available prime development sites across major U.S. cities also continue to decline, which has developers setting their sights on adaptive reuse and innovative renovation projects, which they can bring to the market quicker with less upfront capital spend.”
By: Brian J. Rogal (GlobeSt)
Click here to view source article.
