The 2018 Construction Forecast Report has been released and it is looking good for both the U.S. and Canada. It estimates that residential construction could grow by as much as 6 percent, non-residential by 2 percent, and non-building by about 4 percent.
According to the 2018 Construction Industry Economic Outlook, commercial construction could see an increase of as much as 12 percent. Manufacturing facilities, on the other hand, may experience a decline of about 5.5 percent, down from the 22.8 percent increase is experienced in 2017. Private residential could see an additional 6-9 percent increase over 2017, while private, non-residential could only experience a 1-5 percent increase. Residential construction, specifically single-family homes, may see an uptick if millennials decide to purchase homes. Stadium and arena construction could increase due to the proposed football stadiums in LA and Las Vegas, plus soccer stadiums in and near Miami. Lodging construction may decrease along with retail construction, which could be due to ecommerce development. Airport construction could lead the pubic construction space, with airport terminals and runway expansions.
The Dodge Data & Analytics Outlook Report states that the construction industry “has moved into a mature stage of expansion.”
- Corporate Tax Rate Decrease. With the new Tax Reform bill passed, reduced corporate tax rates from 35 percent to 21 percent, which hopes to spark the manufacturing industry.
- Natural Disasters. The hurricanes and wild fires of 2017, could provide opportunities in the areas most damaged by the natural disasters.
- Tax Reform. Investments in non-residential construction could see a bump due to favorable business conditions.
The Industry Economic Outlook report also states that ongoing construction costs could also increase for 2018, around 2-3 percent, and labor costs by 3-4 percent.
- Labor Shortages. According to the report, “Construction employment is still more than 10 percent below is previous peak.” Which means many firms are having a hard time filling positions for skilled trades, such as carpenters, plumbers, concrete workers, electricians, and bricklayers.
- Mortgage Interest and Property Tax Deductions. Both items were reduced in the new Tax Reform bill, could cause the single-family residential market to take a hit.
- Commodities and Materials Pricing. Both areas are expected to increase in 2018, forcing construction firms to decide where to spend, which could impact profit margins, or simply use what they have.
With all this data, and more if you read each report, at hand, what’s the roadmap look like for a construction business owner? Now is the time to prepare your 2018 – 2020 strategy to help prepare for the ebb and flow of the industry to help keep your firm in the black.
Here are some suggestions:
- With the potential for high employee turnover, firms should consider whistle-blowing programs and job screening more carefully.
- With fewer employees, on-the-job work injuries and sick leave hurt even more. Additional equipment training opportunities should be figured into the plan.
- Due to the potential increase in material costs, now is the time to review your current expenses to find opportunities to decrease costs while increasing productivity. A professional review of your firm’s spending habits could provide cost savings.
- Tax Deductions and Fleet Maintenance. Familiarity with tax laws, simple maintenance steps, and high-tech solutions can reduce the costs of operating your fleet and keep it safer. Learn more in this post.
- Certify Financial Statements. If you are planning to lease or buy heavy equipment in 2018, you may need a loan. If so, having certified financial statements will smooth the process and potential for securing that loan. Learn more about Certified Financial Statements in this post.
- Accounting Software. As construction firms evolve, they quickly outgrow their first-generation accounting software packages. Now is a good time to review what’s working and what’s not working in your accounting tools. Here are some tips.
- Project Delays. Pay close attention when you enter into a deal no matter how profitable it initially appears. Have your legal advisor draw up the contract to help ensure you’re adequately protected in the event of any significant delays. We have several other tips to help overcome project delays in this post.
Move Your Company Forward
The new year might be a great one for your firm. However, without the proper road map, you may find yourself stuck in rut. Give us a call or complete the following form to help Move Your Company Forward and to give you the peace of mind you need to increase business.