JLL: Deepening Labor Struggle Driving Construction’s Future

The construction labor shortage continues to deepen nationally, and as a result commercial real estate building professionals can expect longer project timelines and faster wage growth, reported JLL, Chicago.

The Labor Department said the unemployment rate held steady at 4.1 percent–a 17-year low–in November.

Despite a struggle to find laborers, the commercial real estate industry remained in a “mature” stage of economic expansion in the third quarter, JLL noted. Construction spending increased 1.9 percent over 2016 levels and contractor and subcontractor work increased 1.4 percent year-over-year.

“The construction industry remains strong, but the volume of incoming workers has come close to a halt,” said JLL Project and Development Services President Todd Burns. But he predicted new technologies currently within reach will improve worker productivity, enhance worker safety and create higher quality buildings for the future.

But several innovations including building information modeling, artificial intelligence and prefabrication could have a “profound” effect on efficiency and productivity in 2018 and beyond, JLL said. Building information modeling represents the “enabler” that many technologies including 3-D printing, cloud-based collaboration and robotics all use. Companies such as AutoDesk and Graphisoft offer numerous BIM uses.

Artificial intelligence and big data–gathering, storing and analyzing large data sets–has grown much easier and cheaper over the last several years, the report noted. “Big data and artificial intelligence is already being used to drive autonomous equipment, track and optimize worker positioning and schedule materials delivery–all working toward more efficient and timely job sites,” it said.

In addition, general contractors are turning to prefabrication and offsite construction facilities that allow them to create building product with less skilled labor in a weather-controlled manufacturing environment. “Prefabrication facilities now have the capabilities to tackle everything from individual walls to fully built bathrooms and offices offsite,” JLL said.

Although topline construction spending is still increasing, the last few quarters show smaller and smaller gains, pointing to a “tapering”
growth curve, JLL said. And while the volume of new ground breaks for large-scale private projects has slipped due to the long-term nature of the timelines, renovation and fit-out work demonstrate continued strength, which will prevail into the next several quarters and beyond.

Looking ahead, lenders are seeing less interest in large-scale development loans as developers begin to look more cautiously at the future, JLL Senior Research Analyst Mason Mularoni noted. “[In addition,] available prime development sites across major U.S. cities also continue to decline, which has developers setting their sights on adaptive reuse and innovative renovation projects, which they can bring to the market quicker with less upfront capital spend,” he said.