The State of the
Construction Industry
in the New Decade

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The construction industry is rapidly evolving, but contractors still struggle with missed deadlines and cost overruns. According to a KPMG study, 31 percent of projects came within 10 percent of budget in the last three years, and 98 percent of megaprojects were late, over budget or both.

That means the stakes for engineers, contractors and developers are higher than ever before. As construction costs continue to rise, there is an increasing amount of scrutiny on projected outlays and building schedules, and the penalties for missing target dates are becoming more severe. Because of this, builders around the world are being forced to find ways to cut costs, shorten time to completion and streamline construction, leading to tremendous growth in the number of prefabricated construction projects.

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Chapter 1

The Boom in Construction Prefabrication

The market for prefabricated building is expected to reach $13.59 billion by 2023 according to a study by Market Reports World.

In addition, demand for prefabricated structures goes beyond providing short term building solutions. Research shows that prefabrication is part of permanent construction for factories, hospitals, schools, police stations, fire stations and other projects.

A report from ResearchandMarkets estimates that sales of prefabricated building systems will continue to grow at a CAGR of 5.9% because of the benefits of preconstruction, including accelerated construction timelines, cost savings, greater design flexibility and the use of greener construction methods.


New technology is also driving adoption of prefabricated building systems. Advances in digital modeling and computer-aided design now make it possible to not only create detailed drawings, but also to generate extremely accurate specifications for building fabrication. Builders are becoming more aware of the benefits of prefabricated construction, including year-round construction, lower costs, higher quality finishes and faster assembly.

Even though prefabrication means faster, more cost-effective assembly, it doesn’t mean you have to use cookie-cutter designs. Prefabricated building systems can be customized to accommodate any design or specification. The more complex the design, the simpler the assembly using prefabricated units. At the same time, using prefabricated building systems also promotes consistency, which can be especially desirable if you have multiple projects. Electrical distribution and power systems, for example, can be assembled to the same specifications, which makes installation and maintenance easier, especially if you have multiple locations.


Chapter 2

Modern Market Trends Adding to Project Pressures

The savings in time and resources that builders are seeing from prefabricated construction help combat other industry laden factors that continue to add to construction costs.

Some of the most notable trends that are influencing the construction industry today include:

The National Skilled Labor Shortage

One of the biggest problems contractors face is the growing shortage of skilled labor. The market for skilled contract labor continues to tighten, as workers age, retire and fewer younger workers step in to replace them. The median age of today’s construction worker is 42.6 years old, while less than 9.4 percent of the overall construction workforce are under 25 years of age. Most millennials have a strong idea of what they want to pursue as a career, and only 3 percent are interested in entering construction. No wonder the U.S. Bureau of Labor reported 384,000 open construction positions in August 2019, and 91 percent of contractors report that they can’t find qualified workers. But this demand will continue, as the U.S. Bureau of Labor projects an 11 percent growth rate for construction jobs, which is much faster than other job sectors.

Even if there were a surge of interest in construction as a career, there is still a huge experience gap. As older workers retire, there are fewer experienced construction experts available to train the next generation. Forty-one percent of baby boomers currently working in construction are expected to retire by 2031, creating a large leadership and mentorship gap. Outsourcing construction to prefabrication addresses the problem by requiring the skilled labor to go into preassembly, rather than on-site construction.

Rising Cost of Material

Builders are also feeling the pressure from the rising cost of materials. According to the U.S. Bureau of Labor Statistics, the cost of materials for 2018 rose 9.8 percent over 2017. In fact, the cost of building materials has been climbing steadily since 2014, largely due to an increase in demand, thanks to the ongoing construction boom. According to the Associated General Contractors of America (AGC), the producer price index for construction goods rose 6.4 percent between April 2017 and 2018, while the price index for nonresidential construction rose 4.2 percent. The gap between higher cost of goods and current construction charges is certainly having a dramatic impact on building profits.

Tariffs are also having an impact on the cost of building materials. During the same period, the AGC reported that the producer price index for aluminum rose 11.9 percent, while lumber and plywood increased 11 percent and steel was up 7.4 percent. When you add on a 25 percent tariff on imported steel and a 10 percent tariff on aluminum, it further increases costs, especially when you consider that the United States imported 35 million metric tons of steel in 2017—one third of the steel used in the U.S.

"The gap between higher cost of goods and current construction charges is certainly having a dramatic impact on building profits."


Rising Real Estate Costs

Rising real estate costs are also having an impact on construction costs. The cost of property continues to rise, especially in high growth markets. In 2018, 56 percent of the U.S. market for wholesale data centers was centered in some of the country’s most expensive real estate markets, including Atlanta, Chicago, Dallas, the New York Tri-state Area, Northern Virginia, Phoenix and Silicon Valley. For instance, consider the boom in data center construction around Washington, D.C. Northern Virginia now has more than 100 data centers and 50 million square feet of data center floor space. As demand for premium locations increases, so does the cost of real estate, which drives construction prices up further.

Aging National Infrastructure

As more attention is being focused on the aging U.S. infrastructure, builders are paying the toll. Congress estimates that it will cost $2 trillion over the next 25 years to rebuild and repair roads, bridges, highways, wastewater plants and other parts of the country’s infrastructure. Deficiencies in the current infrastructure, such as an overall lack of access to broadband data and reliable power, are promoting industrial growth in areas that already have those services in place, which contributes to rising real estate costs. In addition, as infrastructure projects start to take precedence, it means fewer skilled laborers are available for other construction projects.

Economic Pressures

Economic experts are anticipating a market correction in the next 18 months, but demand for new construction seems immune to any downturn in the economy. Projections for the construction industry remain positive, although the ongoing problems plaguing the industry may hide any downward trend. An ongoing lack of skilled labor and a backlog in demand may mask a cyclical downturn in industrial building, however. As Anirban Basu, chief economist of Associated Builders and Contractors, observed, “During the most recent economic downturn, nonresidential construction activity peaked in October 2008, fully 10 months into the 2007 to 2009 recession. The existence of backlog is the primary factor behind the lag.” These are just some of the factors that are placing ongoing pressure on builders to cut construction costs and shorten time to completion. Turning to prefabricated building modules is one proven approach to cut overhead, maintain quality and control costs.

Chapter 3

Construction Trends in the Coming Decade

In addition to trends that affect individual construction projects, there are broader trends that are shaping the future of the construction industry.


Perhaps the biggest trend has been the increase in the number of telecommuters. According to, the number of employees who work from home has increased 173 percent, which is 11 percent faster than the in-office workforce. Estimates are that 4.7 million people, or 3.4 percent of the overall workforce, telecommute. According to the U.S. Bureau of Labor Statistics, 26 million Americans, or 16 percent of the workforce, work remotely at least some of the time. Forty percent of the workforce say they work remotely regularly, and 80 to 90 percent of U.S. workers say they would like to telecommute at least some of the time. As a result, desks are vacant between 50 and 60 percent of the time.

What does this mean for office design and construction? One trend is more offices are being structured to handle flex workers. These drop-in employees, who work on-site part of the time, don’t seem to have dedicated workspaces. This means a scaled restructuring of the office space needs to take place to accommodate roving teams and occasional workers. It also means changing the office infrastructure.

For example, data security becomes a different concern as you now have to secure remote communications, rather than only securing data inside the organization. This can pose a real challenge because 38 percent of remote workers say they don’t get the technical support they need, and one in five are accessing corporate data over public Wi-Fi networks. To address this problem, network architects are adopting edge computing and cloud computing strategies to tighten security and protect enterprise assets. It also means designing data systems with the broadband capacity to handle the growing number of remote users. By adopting modular data center designs, businesses can readily adapt and scale their computing operations as needed, to handle remote users—all of which is having a dramatic impact on both data center and building design.

Changing Urban Landscapes

The makeup of urban centers is changing to combat climate change and promote greater energy efficiency. According to research from the World Resources Institute and Yale University, urban areas are expected to grow by 80 percent over the next 10 years, but they need to build up, not out. Horizontal growth is less efficient and consumes expensive land that could be designated for agriculture and other uses. The Institute study concludes that unmanaged urban growth will result in greater economic inequality, additional stresses on public services and environmental problems, among other issues.

At the same time, American homes are getting bigger. The size of the average house has doubled since the 1950s. Today, the size of the average single-family home is 2,584 square feet, according to the National Association of Homebuilders. As houses become bigger, there is a continued need for greater energy efficiency, as well as cost-cutting construction techniques to offset skyrocketing real estate prices. In other words, contractors are being pressured to spend less while creating more living space.

Such trends are driving change in construction techniques, including increased use of prefabricated building components. City high rises and urban renewal are creating demand for prefabricated wiring harnesses, integrated switchboards and power distribution systems, to simplify electrical installation. Using prebuilt modules for home construction also reduces costs and simplifies construction. In addition, because manufactured building components are built by qualified factories and tested prior to delivery, they are generally trouble-free to install and built to conform to national and local building codes.

New Energy Sources

As demand increases for greater energy efficiency and green building design, new construction will also rely on new sources of electricity, in addition to the power grid. In California, for example, new regulations from the California Energy Commission require that all new residential construction include a rooftop solar power system to meet new energy savings requirements. Industrial projects are also looking to supplement building power with solar power, backup battery systems and other strategies to reduce reliance on electricity from the grid. These types of power systems are typically specked and delivered as ready-to-install units—another benefit of prefabrication.

"New data center demand will continue to add to the existing challenges facing the construction industry."

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New Construction Technology

New technology is also having an impact on building construction, as the provision of new tools is shortening construction time and cutting costs.

More construction projects are benefitting from automation. This is exemplified by bricklaying robots and the use of drones on construction sites for land surveying, inspection and security. New battery technology also means more tools can be battery powered, which offers more mobility and convenience on the job site.

In addition to increasing productivity, automation is improving worker safety. Remote machine controls, cameras and safety alerts are all contributing to job site safety. As equipment becomes more autonomous, more jobs can be done remotely, posing less risk to workers. For example, automated equipment can work more efficiently in any type of weather, including rain and fog, which means less risk for workers from poor visibility and slippery conditions.

Computer modeling and design has played an important role in building construction for some time, and the technology continues to improve. Building Information Management (BIM) systems are now able to render precise, threedimensional models of buildings. This has led to the increased adoption of Design for Manufacturing Assembly (DfMA), which provides exact specifications to prefabrication manufacturers for building modules, plumbing, IT cabling and electrical assemblies. The better the design technology, the more exact the specifications become, which cuts costs considerably and saves more time.

Growing Regulatory Pressures

The drive for increased energy efficiencies doesn’t just extend to completed projects. Environmental regulations are also having an impact on construction processes. Regulations extend to construction waste management as well, with many regions imposing taxes for excessive construction waste. As the construction boom continues, more states and municipalities are considering new taxes on industrial waste, which adds to the cost of new construction projects. Opting for prefabricated building modules is one way to eliminate construction site waste.

There are standards for green building construction practices, as well as green building operations. ASHRAE, the American Society of Heating, Refrigeration and Air-Conditioning Engineers, maintains design and construction standards and energy performance standards for green buildings. Leadership in Energy and Environmental Design (LEED) is primarily a building rating system for energy efficiency, but it applies to construction practices as well, especially in areas such as design and materials used.

When working with prefabrication manufacturers, it pays to work with vendors that meet or exceed environmental standards. At PCX, for example, manufacture of our integrated switchboards is customizable to site-specific designs, including environmental regulations for sustainable site waste reduction and use of recycled materials. PCX electrical switchboards and panels are also designed for optimal efficiency in power distribution design, complying with all the latest environmental building standards.

More Complex Projects

New technologies are making building projects more complicated, which is another incentive for outsourcing prefabricated modules. For example, electronic monitoring systems are becoming an integral part of new building design.

The new Amazon Go stores are a prime example of this phenomenon. The entire retail facility is automated to track purchases using a sophisticated array of cameras that track every item removed from retail shelves, while sensors charge all purchases to your Amazon account when you leave the store. You can expect to see more of this kind of building automation in the future, including preconfigured electronic system modules that are easy to install in new and existing structures.

More Data Center Demand

Demand for more data infrastructure is driving new construction projects. As more companies embrace cloud computing, there is a growing need for more colocation providers and hyperscale data centers. According to the CBRE Group, tenant companies paid for 171 megawatts of data center capacity during the first half of 2019, and total power capacity in key markets was up 8 percent over the previous year. IDC estimates that the number of global data centers operated by technology companies will reach 10,000 in 2020, up from 7,500 in 2018.

Construction of hyperscale data centers are outpacing demand for enterprise data centers, as more companies sign up for cloud data repositories. As a result, the big cloud service providers, like Amazon Web Services, Microsoft Azure and Google Cloud, are investing $1-3 billion to build mega data campuses. Apple alone has announced plans to spend $10 billion over the next five years on new U.S.-based data centers.


Chapter 4

The State of Construction in the Years Ahead

These and other trends are setting the stage for the future of construction. Some of these trends will continue, such as the shortage of skilled labor.

New workers are not stepping forward to join the ranks of construction teams, so builders are going to have to embrace new strategies, such as modular building design, to cope with the labor shortage.

Industry Modernization

Overall modernization is going to be essential for the industry. Building construction lags far behind other industries when it comes to embracing new strategies and technologies. New BIM tools and mobile software are making it easier to review plans and track components from the job site. New building materials and techniques are driving eco-friendly construction. However, the old construction project model of design/bid/build hasn’t changed for decades.

Technology Adoption

Technology adoption has to go beyond traditional construction systems, such as contract management, project lifecycle management, asset lifecycle management, finance and staffing. New design and BIM technology empowers engineers and builders to design exactly what they need, and integration for modeling and data sharing has simplified off-site manufacturing and prefabrication. In fact, the entire value chain can be integrated, including design, supply chain, manufacturing and installation, so all the stakeholders can track prefabricated components from conception to delivery.

"The only real variable continues to be available skilled labor. More efficient construction methods, such as modular building design, are going to be needed to compensate for the shortage of labor."



The possibilities presented by prefabrication will revolutionize the way projects are bid, developed and completed. When you outsource components for manufacture, you gain more control over design and costs. Components can be made to exact specifications, which means you not only get the right units, but you also get exact costs. Manufacturing processes aren’t subject to time and materials like stick-built construction, so cost projections are more accurate.

Skilled Labor

The only real variable continues to be available skilled labor. More efficient construction methods, such as modular building design, are going to be needed to compensate for the shortage of labor. Automation and outsourcing are going to become an essential part of construction in the future.

The construction industry is going to have to change with the times to circumvent the skilled labor shortage. The old linear, step-by-step processes are going to have to give way to more efficient, streamlined workflows. For example, thanks to precise computer modeling, you can begin manufacture of prefabricated units before you break ground at the job site. However, enabling parallel construction cycles will require a close review of existing construction processes. Smart builders are going to move away from reactionary processes—waiting for one step to be completed before starting the next—and apply new methods and technologies.

Chapter 5

The Modular Approach to Construction

Modular design is going to play a large role in construction over the next decade. The benefits of modular construction are plentiful and too great to ignore:


Shorter construction time

Modular construction has been demonstrated to be 20 to 50 percent faster than traditional building methods.

Lower overall costs

Using modular construction can save up to 20 percent in costs, mostly from labor expense. A McKinsey report notes that although modular construction has a higher upfront cost, it tends to deliver greater cost savings over the scope of the project. Thanks to automation, the greatest savings come from labor-intensive installations and processes with greater repeatability. Using off-site manufacturing can also promote substantial savings on materials, typically from 5 to 10 percent.

Quality assurance

Using a factory to assemble building components improves quality management, because preassembled units are inspected and tested before they leave the plant.


Design versatility

Because components can be designed and assembled off-site, they can be customized to suit the available space. You also get to choose specific manufacturers that best suit the job.

Environmentally responsible

Factory-built building components mean less waste on the job site. Manufacturers also are using recycled eco-friendly materials to help with ASHRAE compliance and LEED certification.


Chapter 6

Preparing for The Industry's Future

Today, contractors are primarily worried about finding skilled labor, keeping material costs down and reducing the number of change orders on a project.

The Labor Shortage

The labor shortage is destined to continue. According to the U.S. Chamber of Commerce, nine out of 10 contractors are finding trouble hiring skilled workers. The construction sector is one of the fastest growing industries, according to the Bureau of Labor Statistics, and is expected to add 800,000 jobs by 2028. With baby boomers retiring and only 3 percent of millennials interested in construction, the labor shortfall is expected to continue.

Change Orders

Change orders are likely to still be a problem for some time as well. Construction timelines continue to contract, so change orders become a bigger challenge because they tend to be made later in the design and construction process. As the engineers, builders and manufacturers continue to embrace computer modeling and BIM technology, there should be fewer change orders; but the construction industry is notoriously slow to embrace change.

"As the engineers, builders and manufacturers continue to embrace computer modeling and BIM technology, there should be fewer change orders; but the construction industry is notoriously slow to embrace change."

Technological Integration

Expect to see digital transformation in construction, as technology becomes part of every aspect of new building projects. We have mentioned BIM and digital collaboration tools, but you can expect to see more virtual and augmented reality being applied to model build-outs and facilitating collaboration. You also will see more artificial intelligence (AI) and machines being applied for project planning, scheduling and other applications.

Additionally, more mobile technology will come into play, especially with the coming of 5G broadband. For example, as mobile capabilities continue to develop, an increasing number of contractors will use their devices to share data on the job site. Furthermore, by using the Internet of Things (IoT), handheld devices will enable the seamless monitoring of equipment and tracking of materials. Any number of technologies will start to transform construction. The question remains as to which solutions will be adopted first and which emerging technologies will yield the highest returns.


Sustainability also will become central to project planning. For example, more sustainable resources will be used in construction, and materials will be chosen based on recyclability. Materials will be assessed based on their lifecycle and whether they can be reclaimed for use. Concrete, for example, is becoming less desirable because it cannot be reused and is generally bad for the environment.

Chapter 7

Builder-Based Solutions For a Changing Industry

So, what will the successful builder need to know in 10 years?

  • Builders will need stronger soft skills— interpersonal skills that will facilitate collaboration, hiring, employee management and worker retention.
  • Builders will need more technical skills, becoming comfortable with new technologies that improve productivity.
  • Builders will need to be more knowledgeable about regulations, including environmental regulations and local building codes.
  • Builders will need to have a better understanding of construction outsourcing and how to work with suppliers and managing on-site construction.
  • Builders also will need to embrace new product management strategies that include partners, such as engineers and fabricators, as vital members of any project.

As we enter a new decade, you can expect to see the construction industry transformed by new technologies and methodologies designed to shorten construction timelines, reduce overhead and promote sustainability. However, the construction industry has always been slow to embrace change, and innovations will take time to have any real impact. Therefore, builders will continue to rely on proven tools and techniques, like prefabrication, to help them stay competitive in the decade ahead.

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