Almost without exception, I've heard from contractors that 2015 has been a good year, and that 2016 looks promising. In a recent seminar, Ken Simonson, Chief Economist for Associated General Contractors (AGC) of America, echoed these sentiments—but with some caution.Simonson said that he anticipates non-residential construction to grow between 6 - 10% per year in 2016 and 2017. His forecast, however, ranged dramatically within segments. He predicted, for example, that construction within the manufacturing segment could have slight growth in 2016, but then decrease in 2017. Simonson made a similar prediction for construction within the lodging segment.
Simonson was most upbeat about the future of construction within the office, power and commercial segments.
For residential construction, Simonson predicted continued 5 - 9% growth for 2016. He believes multi-family construction could grow between 8% and 12%, while single-family construction will grow between 4% and 8%.
Simonson indicated that while construction spending increased, job growth did not—largely because of the shortage of available workers. This shortage could result in decreased margins due to higher wage rates being required to hire more employees, higher subcontractor costs, and an increased risk of non-performance.
Lessons From the Forecast
Taking a simplistic view of the construction forecast for 2016, companies might be tempted to cut corners. But don't make this mistake. As margins decrease it becomes even more important to continue to focus on safety. Worksite accidents can be very costly and can significantly impact the bottom line. Moreover, OSHA has already announced an increase in its fine structure.
At HNI, we work with our clients to reduce their dependence on insurance by converting insurance from a commodity to a strategic business tool. Our clients have successfully changed employee behavior and have become safer organizations, making safety a daily priority as opposed to just another thing to consider.
In addition, we've seen many construction companies use employee benefits as a way to retain and recruit talent. Ken Simonson's forecast noted that nearly 25% of companies are using employee benefits as a strategy for coping with the worker shortage. Take a fresh look at your current benefits program and find the best ways to strengthen your offerings, and then leverage your strengths to highlight why your company is an ideal place to work.