Construction Industry Trends: May 2022 Roundup
2 Minute Read
June 1, 2022
Summer is here and construction work is heating up along with the weather! In our monthly peek into the latest headlines in the construction industry, we have some potential supply chain relief on the way, calls for better project collaboration, a look at LEGO’s expansion into the United States, and how one contractor is helping its employees beat back inflation.
Online retailing giant Amazon is reportedly scaling back plans to build or maintain 10 million square feet of warehouse space. This follows a period of slow growth and weaker than expected profit margins that Bloomberg attributed to overbuilding. That may sound like a negative for potential construction prospects, but Construction Dive notes this decision might actually be good news for contractors.
Amazon’s pullback could mean a bit of reprieve in the construction supply chain-especially for harder to find materials such as roofing components, precast and steel, and electrical and mechanical equipment. “When Amazon was ramping up, extremely active and building new facilities, the lead times for those materials began to stretch further and further out,” said Tom Belanich, industrial director at Ohio-based Messer Construction. “Then, obviously, the demand for those went up significantly, which caused the price to go up.”
During the pandemic, Amazon was investing heavily in warehouse construction-to the tune of more than $10 billion, or 6% of total construction activity, according to Dodge Data & Analytics. As part of that spend, the company was stockpiling construction materials, putting further strain on supply chains. Other contractors, Construction Dive noted, also began hoarding materials as well, helping inflate prices and shrink viable supply chains.
The Takeaway: This is a good news/bad news scenario. No one likes to see progress halted and warehouse construction remains one of the key construction markets for the foreseeable future. Yet, with thousands of other needed projects backlogged, any unkinking of the supply chain hose is welcome news. Contractors in all sectors have certainly had to adapt during the pandemic, with many turning to modern construction technologies to help streamline materials acquisition and reduce costly waste.
Toy manufacturer LEGO announced plans to build its first factory in the United States. Construction on the $1 billion facility in Chesterfield County, Virginia is expected to start in the fall of this year. The 1.7 million-square-foot plant will be the Denmark company’s seventh factory worldwide, and is expected to create 1,760 jobs. It will also be built as a carbon-neutral facility, with 100% of its energy sourced from an onsite solar park.
“Our factories are located close to our biggest markets which shortens the distance our products have to travel,” said Carsten Rasmussen, Chief Operations Officer, the LEGO Group. “This allows us to rapidly respond to changing consumer demand and helps manage our carbon footprint. Our new factory in the US and expanded capacity at our existing site in Mexico means we will be able to best support long-term growth in the Americas. We are fortunate to find a location where we can begin construction quickly and create temporary capacity in under two years.”
The Takeaway: This news is ripe for puns (was this a “snap” decision? … will they deploy “block” chain technology?), but jokes aside, this is another great project that has been a long-time coming. It should help spur construction work, as well as boost the local Virginia economy. The LEGO Group has also shown a commitment to sustainable building and operations as it has grown into one of the world’s top toy manufacturers.
A new report issued by the American Institute of Architects that looked at improving working relationships and collaboration between architects and contractors, points to mid-project change orders and material substitutions as some of the biggest issues that often put the two camps at odds.
In surveying both architects and contractors, the report notes that both sides actively strive for unified collaboration, yet they disagree on what that means and what areas are most important.. For example, just one in five architects feel that project contractors propose changes and material substitutions that are actually in the best interest of the client, while contractors say the changes are necessary to keep most projects on schedule and budget.
Contractors tend to want (and look for) more collaboration earlier on in the planning stages of projects, while just 19% of architects feel the same. Contractors “want complete specs and drawings, a ‘team player’ mentality, and realism about budget constraints from architects,” the report notes. Contractors also sought much quicker responses to things like RFIs during the construction process.
The Takeaway: These are just a couple of highlights from this super-detailed and compelling report, but it paints a clear picture that construction collaboration is still a key challenge in the industry–especially across extended project teams and stakeholders. That’s why technology is becoming increasingly important in the construction process. Connected, cloud-based construction management suites are transforming projects at all stages by providing single, real-time data sets, connected workflows and easy-to-access web and mobile applications. These technologies are increasingly bringing all project stakeholders together in collaborative spaces to eliminate cumbersome manual steps and inconsistent communication channels.
Inflation and the cost of living is one of the biggest storylines in the United States at the moment. Supply chain issues, global war and sanctions and a number of other factors have led to prices for nearly everything going up. One Nebraska contractor, however, is doing something about it.
Construction Dive recently highlighted the story of Hawkins Construction, which recently made the decision to give its approximately 340 hourly workers two extra checks—each worth $1,000—to help offset employees’ costs for things like rising gas prices, groceries, and other necessities. The first check was sent out in April, with the second coming in August. The decision to provide these payments was an easy one, Hawkins Construction CEO Chris Hawkins said.
“It’s really difficult to overpay for talent,” he told Construction Dive. “You can spend a lot on talent and not regret it.”
The Takeaway: At a time when the construction industry is facing unprecedented challenges in attracting and retaining talent, stories like this should be highlighted. Contractors learned their lesson about rewarding talent and building long-term construction careers following the exodus of employees during the mid-2000s recession. Today, most construction companies are excellent places to work, invest in their workforces, are fostering career stability and provide opportunities to learn a bevy of new skills, including emerging technologies.
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