Annual outlook found challenges and opportunities for builders
Although the recession caused by the COVID-19 pandemic was among the shortest ever, it had long-term impacts that will be felt by the construction and engineering industry for a long time to come, according to an analysis by Deloitte. The consulting firm’s annual outlook identified five trends for the construction industry in 2022.
“The industry has increased its investments in digital, including through mergers and acquisitions (M&A), as it prepares to shift toward connected construction capabilities. These technologies can help E&C firms support initiatives such as smart cities, urban air mobility, and climate change programs and help enhance internal operational efficiencies, reduce costs, and improve margins. 2022 is likely to be an exciting year for the engineering and construction industry,” according to Deloitte.
Survey respondents are much more optimistic than they were last year, with 91% rating their business outlook as very or somewhat positive, up 23% over last year. Part of that optimism comes from expectations around the Infrastructure Investment and Jobs Act and its impact on nonresidential building, but residential construction’s continued strong performance is also driving business confidence, according to Deloitte.
Profitability and performance under pressure
Supply chain disruptions and materials cost increases have affected multiple industries, and key shortages in the construction pipeline persist. A separate Deloitte survey found 20% of E&C respondents believe operating profitability and industry margins will continue to decline in 2022, and 61% expect to invest in strategic sourcing and category management this year.
In light of the challenges associated with procuring and paying for materials, working smarter not harder is a survival technique. Connected technologies that allow builders to reduce downtime, increase efficiency and better understand their operations will become increasingly popular. Deloitte found 43% of executives plan to invest in new design processes in the next year.
Deloitte believes that “connected construction” is more than just smart tech devices that help builders and contractors monitor their worksites more effectively, but will come to be a catch-all that encompasses a more integrated infrastructure throughout the construction value chain; for example, integrating modular and prefabrication processes in the design and build process.
Mergers and acquisitions
E&C firms went on a buying spree in 2021, Deloitte found, with a 152% increase in transactions compared to 2020 just in the first nine months of the year. Deal value topped $16 billion and was expected to pass $20 billion by the end of 2021. Interest is growing in acquiring firms in the software, electronics, technology consulting and even motion picture fields, Deloitte found, which is “further anticipated to pick up pace in 2022 as E&C firms work toward acquiring technologies to help develop a connected, integrated, and automated operations foundation.”
Never-ending labor shortage
Everyone had to figure out how to get back to work safely, but the construction industry’s long-standing labor shortage isn’t helping. Job openings are at a two-year high, according to Deloitte, but companies are struggling to find qualified candidates. That gap is expected to grow as the industry’s slow embrace of technology creates new kinds of jobs like data engineers that require businesses to look for talent in new places and support these kinds of untraditional construction workers.