Can you tell our readers about Associated General Contractors of America and what services you offer to the industry?
Associated General Contractors of America (AGC) is the leading construction trade association in the US. Over 27,000 general contractors, specialty contractors, and suppliers and service providers belong through a network of chapters. They perform every type of construction other than single-family. AGC of America, based in Arlington, Virginia, works to ensure the continued success of the commercial construction industry by advocating for federal, state and local measures that support the industry; providing opportunities for firms to learn about ways to become more accomplished; and connecting them with the resources and individuals they need to be successful businesses and corporate citizens.
How would you describe the current environment in the construction industry in terms of demand and activities?
Demand is shifting significantly from 2022 activities. Single-family homebuilding has been downshifting for several months and is likely to weaken further until late 2023 or beyond. Income-producing properties, such as apartments, offices, retail, warehouse, and hotel construction are vulnerable to a sudden decline as financing and construction costs continue to rise, while demand or willingness to pay higher rents weakens. But demand for manufacturing plants, infrastructure, and renewable energy construction is likely to grow, while data center construction is showing no signs of a letup.
Recovering from the pandemic, did you observe any major changes in construction activities?
For two years, there was strong demand for homebuilding, warehouse, and data center construction, while many nonresidential segments lagged. Office, retail, hotel and other travel-related construction were hit especially hard. As travel and in-store shopping picked up, so did related construction. More recently, warehouse construction has flattened as buying patterns have shifted away from goods and some supply-chain bottlenecks have cleared up.
What can you tell us about construction costs? How are they affected by the supply chain challenges?
Overall, construction costs have moderated as lumber, steel, and aluminum prices have retreated. But there is still upward pressure on some materials, such as gypsum and concrete products. Total construction material costs are still rising faster than consumer prices. Supply chains have improved in general. But there are still long delays and/or allocations for electrical gear, such as transformers and switchgear, and for ready-mix concrete in many parts of the US.
How is the labor situation in the construction industry?
Labor availability is a top concern for many contractors. Construction job openings have been at record highs compared to the same month in prior years. Construction firms have raised pay more steeply than has the private sector as a whole, but finding enough qualified workers is likely to remain challenging for many years.
What can you tell us about the certain measures such as tariffs on steel and aluminum imports and the “Buy America” program to encourage domestic consumption?
AGC's position is that tariffs are harming far more consumers, taxpayers and metal-using businesses than are being helped. "Buy America" restrictions drive up costs and can lead to significant project delays when US suppliers lack the capacity or know-how to satisfy demand.
At last year’s RWR conference, you said the fruits of the infrastructure bill would not be seen until 2023. Where are we now regarding the effect of this bill both on the construction and steel industries?
Only five percent of respondents to the 2023 AGC/Sage Construction Hiring & Business Outlook Survey, which was conducted in November and early December and released on January 4, reported winning a project under the Infrastructure Investment and Jobs Act, while six percent reported they had bid on a project but had not heard the result yet. I expect a very large increase in infrastructure spending over the next several years, but the timing remains uncertain because there are many rules and conditions that must be written or clarified.
What are your expectations for 2023?
Growth overall in nonresidential construction, more or less offsetting a steep decline in single-family home construction. Moderating price pressures but still some supply-chain problems. Continued escalation of wages amid an everlasting hunt for workers.