After a year of stabilization, the construction industry in the U.S. and Canada is positioned for success in 2024, thanks to strong demand and as the normalization of supply chains and material prices, according to JLL’s recent U.S. and Canada Construction Trends 2024 forecast, which explores expected challenges in 2024.
“The industry is ready to successfully meet the challenges of 2024,” said Todd Burns, president, project and development services, Americas, JLL. “With immense housing needs, return to office strengthening and federally backed infrastructure and manufacturing accelerating, the industry is poised for growth despite challenges.”
The forecast noted that supply chains improved in 2023, with the Global Supply Chain Pressure Index hitting a historical low in October and almost all material divisions seeing stability or improvements.
In 2024, slowing private-sector construction starts should keep supply chain pressure manageable, according to the report, but the current pipeline and increase in publicly funded construction is anticipated to prevent price reductions.
“Electrical goods are the exception to widespread supply chain improvement and stability; data center demand, electrification and more demanding tech-enabled spaces across sectors are keeping lead times long and prices rising,” said Andrew Volz, research lead, project and development services, Americas, JLL.
The forecast predicted that construction activity in Canada will likely continue to slow for the next few quarters. However, if inflation continues to slow and debt markets stabilize, it could lead to a rebound in launches beginning in the spring of 2024.
Material costs are also expected to increase by 3 per cent to 5 per cent, with employee wages expected to increase by 4 per cent to 6 per cent, with total costs expected to rise by 3 per cent to 6 per cent.
“Construction investment in Canada reached record levels in 2022, due primarily to booming residential and industrial sectors,” said Rob Ramsay, executive vice president & national lead, project and development services, JLL Canada. “Rising interest rates have dampened activity by slowing the demand for real estate. A silver lining to a slowing economy is that softened demand normalizes inflation, helping to clear up supply chain bottlenecks.”
The forecast noted that in the U.S. and Canada, as the industry faces skilled labor shortages and falling productivity, competency and efficiency will be increasingly valuable among the workforce. It also noted that retention, upskilling and trust building are critical for the next year and beyond.
“Looking forward, success requires building durable partnerships with those who have not only the required technical ability, but also the soft skills necessary for problem-solving and innovation in the face of uncertainty,” said Ramsay.
“With cost pressures easing on the materials side, most of the current cost inflation can be attributed to rising wages,” said Scott Figler, national research director, Canada, JLL. “Canada’s construction wages were generally up by 5 per cent to 7 per cent from 2022 to 2023 and we expect high wage growth to continue well into 2024 at around 4 per cent to 6 per cent.”
“For a successful year ahead, it is imperative that industry leaders keep three strategies in mind,” said Burns. “They must know their people in order to retain talent, know their projects to understand what technologies can be used to assist and know their markets in order to anticipate what is coming next and plan for success.”