More than halfway through 2024, change remains a constant for the construction and architecture & engineering (A&E) industries amid a year marked by potential growth and ongoing challenges. Despite facing a range of operational hurdles, industry leaders maintain an optimistic outlook for the remainder of the year and beyond. As noted by an industry executive, ‘Change is inevitable.’
In response to this shifting landscape, Grassi’s comprehensive industry survey of 250 Construction and A&E leaders identified key insights on revenue expectations, top risks, technology investments, and more. The study, available to download, reveals a complex landscape marked by confidence and caution. Despite some challenges, the industry is resilient by adapting its strategies and seeking new solutions.
The good news is that 56 percent of respondents expect revenue 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 top overall risk for Construction companies, while A&E firms put financial concerns in the number one spot.
These macroeconomic pressures are hitting the bottom line, with over 80 percent of companies reporting higher overhead costs than a year ago. A third have seen these expenses jump by 10 percent or more. Supply chain disruptions are compounding the financial strain, causing significant pricing volatility. In response, Construction firms are getting creative – rethinking their estimating practices, negotiating purchase agreements, expanding their vendor networks and strategically raising prices.
Despite these hurdles, the industry is proving resilient. Access to credit has remained largely stable, with some Contractors even noting more accessible bank financing and/or increased surety programs as compared to a year ago. While there are pockets of concern, such as dimmer views on the New York City 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 technological 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 firms look to harness innovation for competitive advantage.
Forward-thinking companies are also beginning to embrace Environmental, Social and Governance (ESG) frameworks to build long-term value and resilience. While formal ESG programs are still nascent, a quarter of General Contractors and a third of A&E firms have either established initiatives or are actively exploring this space.
On the ownership front, Employee Stock Ownership Plans are attracting increased attention as a succession planning vehicle, particularly in the A&E sector, where a quarter of firms are considering or have already adopted this model.
In this dynamic landscape, adaptability is not just a choice but a necessity. As one industry executive noted, ‘Change is inevitable, but we’re not making drastic shifts. We’re making subtle adjustments with vendors to secure better pricing.’ This sentiment underscores the industry’s need to stay agile and responsive to emerging trends and challenges. Another leader summed up the imperative for innovation: “The advancements in AI technology will be drastic in the future. We’ll have to implement AI technologies in the architecture industries to make sure we’re competitive enough. AI, VR, AR – everything will be a major influence everywhere.”
Download the complete Grassi Construction and A&E Industry Outlook report today for a deeper dive into these trends. You’ll get exclusive insights and analysis to help you:
- Understand how your firm stacks up against industry peers on critical financial and operational metrics.
- Pinpoint the most pressing risks and opportunities for your business in 2024
- Discover how industry leaders leverage emerging technologies, AI, ESG and ESOPs to drive growth and profitability.
- Identify practical strategies for navigating labor challenges, supply chain disruption, inflation, and more.
Download the complimentary report to position your firm for a successful year ahead.
Editor’s Note: Grassi’s 2024 Construction, Architecture & Engineering Survey was fielded between February-March 2024. Information about congestion pricing was included before Governor Hochul’s decision on June 5, 2024, to put the plan on indefinite pause.
