Next year may turn out to be a construction industry thrill ride. Even with the expected recession never materializing, inflation leveling off and the stock market on a sugar high, there could be plenty of climbs, dips and swerves. But it’s harder than ever to see what’s around the corner. High interest rates and tighter credit are likely to slow private construction in 2024, while still volatile pricing for key materials will make it harder to bid longer-term projects—and that could cut into profits, says broker HUB International’s survey outlook for 2024. Worker shortages, higher interest rates and lingering inflation will also prevent some projects from moving forward.
The pervasive bad news about office buildings since the pandemic can make you believe that it is time to hang black crepe around that market. While more companies and government agencies are adopting return-to-office policies, they have not yet reversed the pandemic-born work-at-home phenomenon. Dodge Construction Network says office construction will sink by 2% in 2024 and FMI predicts a 4.4% decline next year. Billings at architecture practices declined sharply in September and October, says the American Institute of Architects/Deltek index. It reflected the lowest score reported since December 2020 during the pandemic height.
Still, the climate crisis along with unfolding technological advances will continue to reshape the way the built environment is created. Eventually, too few high quality, net-zero-carbon office buildings will breed a need for more.
Booming business forays into artificial intelligence, blockchain accounting and cybersecurity awareness are generating an “almost unbounded” outlook for the office market’s data center segment, says Alex Carrick, ConstructConnect chief economist. Federally subsidized electric vehicle chargers should start popping up like spring flowers, now that much of their regulatory work is done, and innovators are pushing ahead with labor-saving building systems.
Those innovations are seen as crucial to limiting project cost overruns and schedule blowouts that lead to litigation. Only the pace of change is in doubt. Until then, new construction will still be constrained by high financing costs and high risk, and what is built will have to meet those higher standards, according to real estate brokerage JLL.
Some familiar holdover problems are likely to stay with us in 2024. Take the situation that dozens of contractors on a King of Prussia, Pa. science and medicine campus find themselves in. The developer of the latest part of the successful Discovery Labs campus is apparently sitting on tens of millions of dollars in payments owed to the contractors, county lien records show—some of it owed since April. “We have not been paid a penny on this project to date,” one of the early-stage contractors told ENR. The developer told the Philadelphia Business Journal that new financing is teed up and “there is no acrimony” and “everybody knows where they stand.”
We suppose that waiting and guessing when you will get paid will still be part of the thrill of being in construction in 2024.
