The construction sector has made a significant recovery from the recession of 2020, but it has also experienced multiple roadblocks that are expected to persist well into the future. While 2022 should be a favourable year, it will come with its own mix of challenges in regards to capturing growth opportunities.
We outline the favourable industry trends and the challenges such as the construction labour shortage to areas of performance, profitability and career growth.
Industry trend challenges
Construction labour shortage
While international borders have reopened, the construction industry is still experiencing the damaging long-term effects of a labour shortage. Building companies across Australia are particularly struggling to fill the roles of project managers, bricklayers, carpenters and electricians. This was compounded by what the Financial Review referred to as the “construction industry notice” when construction development company insolvencies jumped to 40%.
Since late 2019, construction job vacancies have risen by 80% and over 100,000 jobs are expected to go unfilled by 2023 thanks to the lack of skilled and qualified candidates. This skill gap could be attributed to major upcoming commercial and infrastructure projects, which will only increase the number of certified tradesmen required to finish these major projects on time and within the budget.
The principal question arises- can the demand for tradesmen be satisfied?
As we move into the middle of 2022, businesses within the construction sector are beginning to utilise unorthodox methods to recruit the right workers required to complete larger construction projects. Methods include better pay, referral bonuses for staff, to sponsorship for workers originally from overseas. We believe, adapting existing hiring practices or working with new talent management agencies could also be critical to navigate through the current workforce shortage.
Cost of materials continues to affect profitability
Supply chain disruptions for raw materials are continuing to negatively impact delivery, price and profit margins. In particular, import and overseas production has slowed but government infrastructure investment and residential building projects has risen dramatically in the construction industry. As a result, there are not nearly enough materials to meet the influx of new projects.
As such, costs of raw materials has risen by over a quarter for supplies like bricks, tiles and timbers. Whereas, the cost of structural bearers and joists skyrocketed to over 60% according to a Master Builders survey in September 2021.
As restrictions ease worldwide, many other countries will be jumping on the bandwagon- spending big on infrastructure. This causes a global competition for resources, which will mean price hikes and supply shortages will continue well into 2023 and beyond.
The solution- stabilising the construction supply chain by mapping your business’s suppliers, identifying risks and potential solutions in the event your current supplier cannot deliver to your requirements. Implement forecast requirements for upcoming building sites and stagger ordering when appropriate.
Project delays stretch deadlines to their maximum
Since the beginning of the pandemic, project delays to infrastructure and large-scale sites have since doubled. The median delay pre-pandemic was approximately 100 days, while post-pandemic projects were sitting at more than 200 days. In more extreme cases, one in four projects are being delivered up to 250 days behind schedule.
“Because this issue was not dealt with before the pandemic, we are now in a situation where projects have suddenly become much riskier. This will pile pressure on contractors and may mean clients bring forward fewer projects”- according to Dev Amratia, CEO of nPlan.
As mentioned previously, the major reason for delays is a lack of skilled labour and materials shortages- all pre-existing challenges which have been exacerbated by COVID-19 restrictions in Australia, and worldwide.
The construction industry will have to consider utilising innovative planning software to leverage historic data to forecast more likely (and favourable) project outcomes, and make informed decisions on project risks.
Areas of growth
Connected construction to accelerate the industry
Aptly dubbed “connected construction technologies”, we expect to see a further adoption of these digital tools this 2022. Management tools such as Procore or Coins can increase the ability to offer construction businesses a seamless cross-channel experience for their clients. This can include new collaborative tools, forecast estimation software to internal tools such as accounting, or a cloud-based HR system.
Integrating such tools can allow workers to engage collaboratively, even when they cannot physically be together. This prevents hours of back and forth, improves construction estimates and increases sustainability through removing paper-heavy processes.
Nevertheless, we also predict that certain specific sectors like real estate, may struggle to adapt due to their concerns that it may hamper their ability to innovate.
Construction recruitment takes on greater importance
The construction industry plays an important role in the Australian economy. It employs over 1.2 million people, making it about 9% of the whole workforce. While employment has increased by 7.1% over the last five years, personnel turnover (at around 10%) is still one of the greatest challenges that construction project managers encounter.
We expect to see construction companies to continue revisiting their hiring practices well into 2023, relying on more experienced industry recruiters to choose the right candidates for the right roles, at the right time more holistically.
We predict major players in the construction industry will adopt one or more of the following trends to improve employee retention, and rebuild their workforce:
- Managing upcoming projects and resource requirements for the year in advance to successfully deliver greater scopes of work within budget, and on time.
- Mapping project requirements in greater detail, outlining volume, current skills in their existing workforce and existing pain points.
- Identifying members of their workforce who can be upskilled, then planning a development plan that aligns with incoming priorities.
- Recruiting for both skills and attributes ensures that future employees can grow the culture and the functionality of their construction team.
- Streamlining processes and automation tasks to improve communication between site managers and stakeholders.
- Investing in training, technology and development to ensure their workforce delivers more consistent goals, and retains relevant skills as their industry evolves.
It is a good time to be involved in construction
Boost in infrastructure and residential projects means big business
According to the ABS employment statistics, building and construction work fell by 2.6% by the end of 2020, with construction employment accounting under 10% of total employment across Australia’s economy.
Thanks to COVID-19, the underlying downtrend in commercial construction activity and the mandated lockdowns drove a downturn in employment.
However, all is not lost.
We are seeing a strong rebound in infrastructure engineering and residential building activity. The two are currently driving the recovery in employment, and are expected to push job numbers up to 1.2 million in 2022. This continued uplift in residential and infrastructure spending should continue to sustain growth in job numbers well into 2023.
While the outlook for residential and infrastructure is stronger than expected, recovery remains uneven for commercial building projects.
Global contractors have reason to do business with Aussies again
Despite the challenges, 2022’s construction trends have proven that the industry will remain resilient in the upcoming years. Thanks to the residential construction surge and a strong pipeline of infrastructure projects, the Australian construction sector can look forward to an annual 3.4% growth from 2022-2025.
Borders have opened again, and such projects are likely to attract contractors worldwide which will undeniably lessen the construction labour shortage strain.
Furthermore, the number of skilled Australians in construction is expected to increase by 5.2% by the end 2022. While it does not completely fill the gap, it still gives us 55,000 more certified and experienced building professionals to make a positive difference to commercial project outcomes.
This year shows great promise for the construction industry overcoming a few challenges and adapting into a more digital future to build a stronger, and more successful industry.
Are you eager to advance your career in the construction industry or infrastructure? At Gough Recruitment, we have both short and long-term positions ranging from engineering, project management and much more.
Contact us today for more information about your next exciting opportunity.