Construction Industry Approaches 2022 with Cautious Optimism

By Robb Kahl, CBG Executive Director

2021 is receiving mixed reviews from the construction industry. For many, balance sheet forecasts remained strong as many contractors were completing projects negotiated and won pre-pandemic. In 2021, U.S. new construction starts from January–October rose, but the value of the spending was down for both private non-residential and public projects. The U.S. Chamber of Commerce third quarter Commercial Construction Index reflects increases again as contractor confidence and backlog indicators improved. Ongoing supply chain challenges and slowed construction starts remain a concern for both non-residential and transportation construction industries.

For years, Wisconsin has suffered from a lack of infrastructure investment, evident by the C grade awarded on Wisconsin’s infrastructure report card by the American Society of Civil Engineers. The much anticipated $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), signed in November, authorizes an additional $550 billion above baseline infrastructure spending. This infrastructure investment is critical to Wisconsin as it provides funds for the interconnected transportation network and supports expansion of broadband, bridge repair and clean energy transmission and power upgrades. Initial forecasts on the impact of the IIJA on Wisconsin’s transportation funding includes $5.2 billion for highway, $225 million for bridge, and $592 million for public transportation over the next five years.

The non-residential construction industry is following national trends with increases in the warehouse and food/beverage markets that rapidly expanded during the pandemic as retailers responded to new ways to connect shoppers with products, without entering their stores. K-12 education, traditionally a strong market for Wisconsin, is on a slowing trend as just over 50% of school referendums passed this spring. Health care construction has showed minor increases as the health systems continue to invest in smaller regional and specialized medical centers that provide more convenient access to residents. Multi-family residential construction remained strong throughout 2021 and is forecasted to continue in 2022 as workers have more flexibility in where to live, given employer willingness to accommodate flexible remote workers.

The top collective concern for the construction industry is availability and cost of building materials. Steel had a record price increase of 133% over the last 18 months; copper, aluminum, and lumber prices increased 40-65% over the same period. While faring better than many industries, worker shortages for the construction industry remain a concern with 74% of contractors planning to hire in the next year and 90% already seeking skilled craft workers. The vaccine mandate is expected to create additional workforce struggles as the construction industry lags other industries’ vaccination rates (53% for construction vs 81% for other occupations).

Wisconsin’s construction industry contributes to the quality of life we enjoy – by building the roads we travel, the workplaces that employ, the schools that teach, and the healthcare system that keeps us safe. It is important that we remain focused on investing in Wisconsin’s transportation infrastructure and building industry but must also play a bigger role in promoting the construction industry as an opportunity for both personally and financially rewarding career opportunities.

The Construction Business Group promotes and protects the construction industry. We ensure fair contracting laws are followed on public construction projects. We work cooperatively with contractors, employees and public entities by educating them on fair contracting laws, monitoring projects for fair contracting compliance, and identifying and helping to resolve compliance issues.