Rising Material Costs and Labor Challenges Impeding US Construction Activity According to Industry Survey

Alexandra Gross

The latest RICS Global Construction Monitor for Q1 2022 reports continued growth in activity across the US construction markets.RICS Global

According to the latest RICS Global Construction Monitor for Q1 2022, there is continued growth in activity across the US construction markets despite rising concerns over the cost and availability of materials to complete the projects.

In terms of current workloads at a region wide level, the net balance of respondents seeing an increase in activity compared to the preceding quarter stands at +52%. Looking forward over the next twelve months, a net balance of +80% expect infrastructure workloads to continue to increase and while there is more positivity about the other segments of the construction industry at this time horizon, infrastructure projects will lead activity; private non-residential has a reading of +67% while for private residential, it is +43%.

However, despite the strength in current workloads the impact of global supply chain shortages is impeding activity across America. Material costs are currently the biggest impediment to growth with all respondents to the survey (100%) reporting that elevated material costs are currently impacting market activity. Aside from costs, the availability of materials, and access to is a significant challenge, highlighted by 77% of respondents.

Labor shortages and access to the right skills doesn’t seem to be improving. In the US, 77% of respondents are struggling to find the right skilled labor, while access to trades, like electricians and carpenters are also hard to come by.

Despite the current challenges, respondents still remain optimistic for the coming year ahead as workloads are anticipated to rise. The current infrastructure projects and pipeline is set to sustain the American construction sector as +80% American contributors anticipate a rise in workloads for the year ahead.

RICS Chief Economist, Simon Rubinsohn, commented: “The good news in the latest report is that the industry remains positive about the outlook for activity and that the generally upbeat mood can be seen not just in regard of infrastructure and housing development but also in the commercial sector. However, it is clear that the sector faces significant challenges which have been reflected in recent official data showing a sharp rise in vacancies across the construction industry. RICS numbers demonstrate these shortages are pretty much across the board including quantity surveyors and project managers as well as both skilled trades and more general labor. This, combined with problems around accessing building materials in the current environment, is exerting significant upward pressure on construction costs at the present time.”

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