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Subjects: Survey, Economic News/Analysis

Labor Shortages Impacting Construction Growth Potential for Booming Mission-Critical Sectors

Global construction consultant Linesight today released its Construction Market Insights report for the Americas, showing that demand for construction workers has surged, leading to rising labor costs and increased project delays.

The construction industry has shown resilience with robust growth in the data center and high-tech industrial sectors, offsetting the 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 labor shortages.

The widening gap between labor supply and demand is increasing costs. In January 2024, average hourly earnings in the construction sector surged by 5.18%. 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," Patrick Ryan, Executive Vice President - Americas at Linesight commented. "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 labor 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 an additional 500,000 workers beyond the normal pace of hiring to meet demand in 2024. The shortage is particularly acute for skilled workers in HVAC, carpentry, electricity, ironwork, painting, plumbing and roofing. This is compounded by an ageing workforce: Most U.S. states anticipate an average age attrition of 24.5% of construction laborers over the next two years.

Sector-specific trends

Data center: Growth is likely to remain strong due to the increasing demand for cloud services and data-intensive applications. Power consumption capacity in the U.S. is forecast to skyrocket to 35 gigawatts by 2030, nearly double its 2022 level. Data centers are competing for the same shrinking pool of skilled labor as chip manufacturing and energy storage facility builders.

Life sciences: In the life sciences sector, soaring demand for laboratory space has led to an uptick in office-to-lab conversions, presenting challenges for existing infrastructure, utilities, regulatory adherence and storage needs. There's a sustained emphasis on R&D, with the clinical development pipeline of Phases 1 and 2 standing at the largest it has been in two decades.

High-tech Industrial: Chip manufacturing capacity in the Americas is projected to increase by 6% year-over-year by the end of 2024, reaching approximately 3.1 million wafers per month by the end of 2024. New fabrication locations as well as retrofits and conversions of existing facilities, spurred on by government investments in semiconductor and battery manufacturing facilities, are driving growth.

Commercial: Remote and hybrid work models are contributing to double-digit commercial vacancy rates, although Grade A spaces and green-rated buildings remain resilient. 2023 saw a record-breaking volume of office inventory, primarily Grade B and C office buildings, undergoing conversions into alternative uses such as lab spaces and storage facilities, supported by federal government incentives.

The report can be read in full HERE

About Linesight

Linesight is a multinational consultancy firm with over 50 years' experience, providing cost, schedule, program, and project management services to multiple sectors including Life Sciences, Commercial, Data Centers, High-Tech Industrial, Residential, Hospitality, Healthcare, and Retail. Linesight's specialist project teams, each with specific skills and experience, provide faster project delivery, greater cost efficiency, and maximum value for money for their clients. For further information, please visit https://www.linesight.com

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