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As supply chains normalize and commodity prices ease, Linesight report points at labour as one of the most significant issues facing the construction industry in North America.
Linesight’s Construction Market Insights. (Image courtesy of Linesight)
Demand for construction workers has surged, leading to rising labour costs and increased project delays says global construction consultant Linesight in its most recent Construction Market Insights report for the Americas, which includes input from construction firms in Canada and the United States.
According to the company’s research, the construction industry has shown resilience with robust growth in the data centre and high-tech industrial sectors, offsetting a decline in the commercial and residential sectors. While commodity prices have eased, several challenges persist including higher finance costs as a result of elevated interest rates, as well as challenging supply chain timelines for MEP equipment and labour shortages.
The widening gap between labour supply and demand is increasing costs. In January 2024, average hourly earnings in the construction sector surged by 5.18 per cent. Many projects are also affected by inadequate workforce availability, leading to cost overruns, project delays and compromised work quality.
“We know that people aren’t entering the construction industry in the numbers we need to keep up with demand,” commented Patrick Ryan, executive vice-president for the Americas at Linesight. “The industry needs to invest in upskilling workers and recruiting new talent, and it needs to be open to implementing digital technologies. Only this way will the industry be able to maintain its service delivery cadence and be resilient for the future.”
Construction industry leaders and government stakeholders recognize that a long-term solution to persistent labour shortages will include implementation of digital technologies, including automation and robotics as well as modular and off-site manufacturing techniques.
Overall, the industry will require a significant increase in workers – well beyond the normal pace of hiring to meet demand. The shortage, says Linesight, is particularly acute for skilled workers in HVAC, carpentry, electricity, ironwork, painting, plumbing and roofing, and is compounded by an ageing workforce.
Driving this need for labour will be growth in key sectors, like data centres as demand continues to increase for cloud services and data-intensive applications, laboratory space which is seeing an uptick in office-to-lab conversions, and the commercial market as remote and hybrid work models are contributing to double-digit commercial vacancy rates, which is expanding the conversion of Grade B and C office buildings into alternative uses such as lab spaces and storage facilities.