More than halfway through 2024, change remains a constant for the construction and architecture and engineering (A&E) industries amid a year marked by potential growth and ongoing challenges. Despite facing a number of operational hurdles, industry leaders maintain an optimistic outlook for the rest of the year and beyond. As one industry executive noted, “Change is inevitable.”
In response to this changing landscape, Grassi’s comprehensive industry survey of 250 construction and A&E leaders identified a key insight.s about revenue expectations, major risks, technology investments and more. The study, available for download, reveals a complex landscape marked by trust and prudence. Despite some challenges, the industry remains resilient by adapting its strategies and looking for new solutions.
The good news is that 56% of respondents expect earnings to increase this year, with 63% of general contractors leading the pack. However, inflation and labor shortages are overshadowing this positive outlook. More than half of executives cite the rising cost and limited availability of skilled workers as the biggest threat to their businesses over the next 12 months. Inflation ranks as the most important overall risk for construction companies, while A&E companies put financial concerns first.
These macroeconomic pressures are hitting the bottom line, with more than 80% of companies reporting higher overhead costs than a year ago. A third have seen these expenses increase by 10% or more. Supply chain disruptions exacerbate financial stress, causing significant price volatility. In response, construction companies are getting creative: rethinking their estimating practices, negotiating purchase agreements, expanding supplier networks, and strategically raising prices.
Despite these obstacles, the industry is proving resilient. Access to credit has remained largely stable, with some contractors even seeing more accessible bank financing and/or increased bond programs compared to a year ago. While there are points of concern, such as dimmer views of New York City’s residential sector among subcontractors, many leaders face the future with pragmatic confidence.
Technology is emerging as a critical area of focus and investment. More than half of companies plan to upgrade their technology capabilities in the next 12-18 months, with project management and collaboration platforms leading the way. Artificial intelligence, building information modeling, data analytics and wearables are also gaining traction as companies look to leverage innovation to gain a competitive advantage.
Advanced companies are also beginning to adopt environmental, social and governance (ESG) frameworks to build long-term value and resilience. Although formal ESG programs are still nascent, a quarter of general contractors and a third of A&E firms have established initiatives or are actively exploring this space.
On the ownership side, employee share plans are gaining more attention as a succession planning vehicle, particularly in the A&E sector, where a quarter of companies are considering or have already adopted this model.
In this dynamic landscape, adaptability is not just an option but a necessity. As one industry executive noted, “Change is inevitable, but we’re not making drastic changes. We’re making subtle adjustments with vendors to ensure better pricing.” This sentiment underscores the need for the industry to remain nimble and responsive to emerging trends and challenges. Another leader summed up the imperative for innovation: “Advances in AI technology will be drastic in the future. We will need to implement AI technologies in the architecture industries to ensure that we are sufficiently competitive. AI, VR, AR─everything will be a major influence everywhere.”
Download the full Grassi Construction and A&E Industry Outlook report today to learn more about these trends. You’ll gain exclusive insights and analysis that will help you:
- Understand how your company compares to industry peers on critical financial and operational metrics.
- Identify the most pressing risks and opportunities for your business in 2024
- Learn how industry leaders are leveraging emerging technologies, AI, ESG and ESOPs to drive growth and profitability.
- Identify practical strategies for dealing with labor challenges, supply chain disruption, inflation and more.
Download the free report to position your business for a successful year.
Editor’s Note: Grassi’s 2024 Construction, Architecture and Engineering Survey was conducted between February and March 2024. Information on congestion pricing was included prior to Governor Hochul’s decision on 5 of June 2024, to put the plan on indefinite pause.
