October 20

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Construction Growth in 2022

By Robert Salvador

October 20, 2021


According to the Q4 - 2021 update released by Equipment Leasing and Finance Foundation, the U.S. economy expanded at a robust 6.7% annualized rate in Q2 - 2021, about the same pace as in the first quarter. U.S. GDP is now above the level achieved at the end of 2019, before the pandemic began. The U.S. manufacturing sector  is expected to face historically high levels of demand, despite slowed growth in the prior quarter. 

The report, which is focused on the nearly $1 trillion equipment leasing and finance industry, highlights key trends in equipment investment and places them in the context of the broader U.S. economic climate. The Foundation produces the Outlook report in partnership with economic and public policy consulting firm Keybridge Research.

U.S. business does continue to be stymied by the resurgence of COVID-19, which has reduced consumer confidence particularly for small businesses.

The report lists these concerns for the remainder of 2021 include:

  • Concerns of high inflation
  • Uncertainty surrounding fiscal policy
  • The potential for tighter financial conditions that could impact equity markets
  • The trajectory of the pandemic

The Construction Industry

Overall, the construction industry has recovered well from the pandemic by most measures. Employment is near pre-pandemic levels and total construction spending is well above the early months of 2020. Construction starts are steady and demand for architectural work remains strong.

Residential Construction

After a positive spring and summer, U.S. homebuilding unexpectedly fell in September amid material shortages of challenges with labor that are crimping the housing market and overall economic activity.

Housing starts dropped 1.6% to a seasonally adjusted annual rate of 1.555 million units last month, the Commerce Department said on Tuesday. The August numbers were revised down to a rate of 1.580 million units from the previously reported 1.615 million units. Permits for future homebuilding declined 7.7% to a rate of 1.589 million units last month.

Although  lumber prices have tumbled recently, the lower prices are slow to reach the builders. Many building materials are still in short supply, windows,  electric breaker boxes and other electrical components are some examples. The supply chain has been strained by the COVID-19 pandemic upending of labor market dynamics, which has pushed up prices across all segments of the economy. 

Production capacity and supply chains were constrained earlier in the pandemic, due to employee absenteeism, facility closures, and inconsistent component sourcing. These challenges have continued for some of the same factors and also because of congestion at our nation’s ports and a few adverse weather events. 

The Port of Long Beach, the second busiest gateway in North America by container volume, is experiencing significant congestion due to increased cargo. Some Gulf and East coast ports were temporarily shut down by recent hurricanes, causing additional shipping delays.

D.R. Horton Inc. the largest U.S. homebuilder recently cut its forecast for annual revenue and homes closed pointing to the supply chain disruptions mentioned above, delivery delays in building materials and the labor market. The Texas-based company now expects homes closed between 81,300 and 81,700, from its prior outlook of 83,000 to 84,500 homes.

A survey from the National Association of Home Builders on Monday showed confidence among single-family homebuilders rising further in October, but noted that "builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times.”

High inflation is also lifting mortgage rates. The 30-year fixed mortgage rate rose to an average of 3.05 last week from 2.99% in the prior week, according to data from mortgage giant Freddie Mac

The two biggest challenges as we look at the remainder of  2021 and predictions for 2022:

  1. Supply-chain delays and record-high costs of multiple key materials continue to pressure project execution and profitability
  2. COVID-19’s delta variant slowed economic growth, and future waves of the pandemic have potential to do the same.

Commercial Construction

Revenue for the Commercial Construction industry has fallen moderately due to a reduction in activity in 2020 and early weakness in construction leading into 2021. This is expected to weaken industry performance short term but revenue growth is anticipated to accelerate as the industry moves away from the initial impacts of the pandemic, even considering the Delta Variant.

As 2021 draws to a close, the commercial construction industry is much more active than was expected. Overall volume is expected to peak this year, before pre-pandemic trends resume next year.

A new factor as we enter 2022 will be the government's new infrastructure spending plan that will see an extra $550bn being spent on everything from road improvements, broadband upgrades,  power network improvements and the replacement of water pipes.  The coronavirus relief package is expected to boost the U.S. construction output over the next few years. The 1.9 trillion U.S. dollars stimulus is expected to raise infrastructure spending especially with other relief plans also focusing on clean energy and transportation. 

Key construction investments of the 550 Billion will be directed towards:

  • Roads and Bridges -$110 Billion
  • Rail - $66 Billion
  • Airports - $25 Billion
  • Energy Infrastructure - $73 Billion 
  • Safe Water Infrastructure - $55 Billion

Construction Software and BIM

The building information modeling market was valued at USD 5.4 billion in 2020 and is projected to reach USD 10.7 billion by 2026. It is expected to grow at a CAGR of 12.5%

The construction management software market in the application software industry is poised to grow by USD 630.51 million during 2021-2025, progressing at a CAGR of almost 8%. 

Why DigiBuild?

DigiBuild is a blockchain-enabled construction project management platform. Our customers manage workflows such as procurement, budgets, schedules, contracts, and payments. DigiBuild allows for collaboration across 50+ disparate construction stakeholders – all on a single platform. 

We are the first to merge our construction management expertise with blockchain technology to create the world’s most revolutionary technology bringing risk management and visibility to your projects.

Through verifiable collaboration, we eliminate risk, disputes, save time and create a healthier and happier global construction industry.

Robert Salvador

About The Author

Rob Salvador is the visionary driving force behind DigiBuild, an experienced builder, project manager and construction technologist. Since the age of 10, Rob has witnessed what it was like, firsthand for his Dad struggling to run his construction company. He eventually started his own construction company and those experiences and the lack of change over that time span led to his mission of creating a better way to operate construction projects and the construction community. Rob’s passion and previous cryptocurrency startup experiences are what led to him becoming a blockchain expert. In 2017 he had his ‘aha moment’ and the idea of 'how to' apply blockchain to construction took form and DigiBuild was born.

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