An aging infrastructure is dictating construction industry trends. Congress has committed $2 trillion over the next 25 years to fix the nation’s infrastructure, and experts estimate that it will cost $1 trillion alone to fix the nation’s roadways and bridges. But that doesn’t take into account the aging office complexes and data systems. Architects, contractors, and engineers are looking for new ways to approach building projects, in an effort to handle growing demand with reduced budgets and tighter deadlines. That’s why prefabrication and similar strategies are growing in popularity, and becoming construction industry trends.
The construction industry has always been plagued with cost overruns and missed deadlines. According to KPMG, 31 percent of projects over the last three years came within 10 percent of budget. 98 percent of mega projects were also either over budget, late, or both. At the same time, a survey of American architecture firms showed that 15 percent have seen projects canceled, 40 percent have seen significant delays, and 30 percent have seen projects scaled back, due to cost increases and labor shortages. New construction projects are going to require new strategies to balance costs, deadlines, and the rising demand, as a result of the aging national infrastructure.
According to Market Reports World, the global market for prefabricated construction will reach $35 billion by 2023, with a Compound Annual Growth Rate (CAGR) of 5.9 percent through 2024. Modular systems and prefabrication promise to help builders keep pace with growing demand, especially as new technologies and preconstruction methodologies make it easier to design custom building modules that will work together. Digital modeling and computer-aided design also make it possible to develop prefabricated systems to exacting specifications.
The Continued Labor Shortage
The lack of skilled labor is an ongoing and industry-laden problem, and it’s likely to get worse. The current construction labor force is aging. The median age of today’s construction workers is 42.6 years old, and only 9.4 percent of laborers are 25 years old or younger. At the same time, 41 percent of the current workforce will retire by 2031. As the old guard retires, there is no new labor force to learn from their experience and take their place, despite an 11 percent growth in available construction jobs.
With the resurgence in infrastructure spending available, labor is migrating to bigger construction projects that require more manpower and provide long-term work. As a result, contractors are hard-pressed to find labor for commercial projects. They also have to pay higher wages and use more subcontractors, which drives up construction costs.
Prefabrication is helping solve the labor shortage by reducing the demand for skilled labor on the job site. Fabricators are prebuilding everything, from walls to electrical distribution centers. Completed modules can be designed and built to specification, while having the ability to be delivered ready to install, so you don’t need as many specialty contractors or experts to handle final assembly.
Rising Materials Costs
Materials are becoming more expensive and have seen a steady climb in costs since 2014. According to the National Association of Home Builders, the cost of materials rose by 2.0 percent in 2016, 2.9 percent in 2017. 4.9 percent in 2018, and finally started to slow with a 1.7 percent increase in 2019. The rising cost of materials is largely due to an increase in demand, from infrastructure repair, replacement, and commercial construction.
Tariffs are playing a role in higher materials prices as well. In 2019, $10 billion worth of imported building materials were taxed, including a 25 percent tax on foreign steel and a 10 percent tax on aluminum, which is driving up material costs across the board. Material supply is another factor affecting costs and time-to-completion, as more commercial steel and construction materials are being allocated for infrastructure repairs.
Modular construction serves as a solution here as well, as it can help contractors control the availability and costs of materials. By contracting for prefabricated systems, the price of materials is set in advance so there are no surprises. The module supplier is responsible for maintaining an inventory of parts and materials, and the finished goods are delivered at a fixed price, so cost projections are more accurate and not subject to fluctuations in material costs.
Rising Real Estate Prices
The rising cost of property is taking its toll on new construction projects as well. More businesses are looking to build inexpensive urban centers that are closer to needed resources, including telecommunications and broadband capacity. Urban hubs such as Atlanta, Chicago, Dallas, the New York Tri-State Area, Northern Virginia, Phoenix and Silicon Valley all have some of the most expensive commercial real estate in the country. This is due in part to having become hotbeds for data infrastructure. In Northern Virginia alone, there are now more than 10 million square feet of space across 100 data centers.
Rising real estate prices are also driving up costs for commercial construction projects. Architects and engineers are looking for ways to upgrade existing facilities without adding more square footage. In addition, these same architects and engineers are looking for ways to make better use of available land.
Modular construction will prove beneficial here as well, because prefabricated systems can be designed to fit into existing facilities. In data centers, for example, modular wiring systems and computing racks can be prebuilt and added, without requiring additional property, as they possess a compact footprint. Even state-of-the-art, self-contained data centers can be delivered, ready to go, for installation adjacent to an office building or in a parking lot, without requiring a large plot for an expansive structure.
These are just three of the market factors that will shape commercial building in the years to come, as a result of the aging national infrastructure. In response, you’ll continue to see construction industry trends—like modular design and construction—greatly assist in controlling costs and shortening construction time.
If you want to learn more about the changes you can expect in construction in the years ahead, download our guide, The State of the Construction Industry in the New Decade.