Being great in an upturn to be prepared for a downturn

What will the new year bring?

As we embark on 2016, we typically look back at where we were over the past year. In the construction industry in particular, both commercial and residential construction ended 2015 on a positive note. Construction companies had good backlog and fees have inched back up slightly from the lows in the last five years.

Associated Builders and Contractors (ABC) provides several indicators of performance in the real estate residential and construction industry, and according to ABC’s Construction Confidence Index (CCI), contractor confidence is high in both sales and profit margins. Furthermore, ABC’s Construction Backlog Indicator (CBI) demonstrates strong demand showing an average of 8.5 months in backlog by the end of the third quarter of 2015.  

Construction unemployment rates have a seasonal pattern and we have seen an uptick in seasonally adjusted (SA) and not seasonally adjusted (NSA) employment comparing 2014 to 2015. As of November 2014, year-to-date seasonal employment in construction increased by 215,000 in the U.S., while NSA increased by 267,000. The national NSA construction unemployment rate has fallen every month for over five years—starting in 2010—showcasing that the construction industry continues to provide reliable jobs for people in our communities. The lowest construction unemployment rates, which were tracked in November, placed Colorado second on the list, beat out only by New Hampshire. In rank order the states with the lowest construction unemployment are:

  1. New Hampshire (3.7 percent)
  2. Colorado (3.9 percent)
  3. Georgia and Virginia (4.0 percent)
  4. Idaho and Maryland (4.1 percent)

For perspective, the national unemployment rate in November, 2015 was 5.0 percent, which is the lowest unemployment rate in nearly seven years.

But where are we headed in the new year? And after ending the year on such a positive note, how can we prepare for the next downturn?

While some have concerns that multifamily residential construction may be slowing, it is evident across the nation there is more demand for single-family and multifamily units than there is supply. In July of 2015 housing starts expanded to a near eight-year high. Also, single-family starts increased by 13 percent to an annualized pace of 782,000 units, which is the highest level since 2007.

As the population of millennials and baby boomers continues to grow we have also seen a need for more senior housing and more affordable housing, two very niche housing options. Many of these housing projects are being built in urban areas providing potential tenants with easy and quick access to amenities like museums, restaurants and shopping.

Some challenges linger from 2015 into 2016 however. One of these challenges is the shortage of skilled labor. The industry needs to invest in producing more programs that educate individuals that there is a viable and long-term income and career source in the construction industry, especially with unemployment in the industry continuing to lessen. A pending challenge evident at the start of 2016 is the weak global economy and strong U.S. dollar. This may have implications in the months to come for the people we build for. And, of course, the local Colorado market will see impacts from the oil and gas business slump. With these challenges in the shadows, many companies will shift their attention to talent development and training to accommodate the current growth opportunities while intentionally focusing on work productive diversification in preparation for a future downturn.

With the emphasis on cutting back fossil fuel emissions to slow the effects of climate change, the construction industry may also have to shift the way we are currently building. This shift in building could mean utilizing other energy and power sources that make an even smaller impact on the environment. Building “green” is slowly becoming more of the norm instead of something that sets buildings apart, so as an industry we seem to be on the right track.

In 2016, we also believe we will see the need for more interesting and unique ways of building. With a new style of worker—those who require flexible work hours and flex space to do their work in—the construction industry will need to continue to think outside of the box when planning for and building commercial office space.

As Shaw Construction embarks on our future, it is our goal to be involved in many successful projects taking into consideration the changes in the face of our economy, state legislature, federal election and global shifts in fiduciary power. We strongly believe successful projects are typically the result of great teams solving challenging problems together. We understand there may be limited or shifting resources in labor and that the landscape of the construction industry will shift with changing times. As a company we are committed to helping to solve the problem and to serve as a resource for potential solutions.

At Shaw, we attempt to narrow the gap to be part of a growing economy instead of bracing for a downturn. Now is the time to think about how your business will position itself in 2016, taking into account where you ended 2015 and what is expected in your industry in the year to come.

Sources: Associated Builders and Contractors, National Conference of State Legislatures, American Institute of Architects, Construction Executive

(Editor's note: This sponsored content was provided by Shaw Construction.)

Categories: Company Perspectives, Sponsored Content