It’s no secret that 2020 was a pivotal year for the construction industry. But what may be less clear is what this year will hold–until now, that is. It turns out that 2021 is shaping up to be another turning point for the construction industry, according to a new report. Owners have more considerations than ever before, and it’s important to stay ahead of key insights and trends.
To paint a clearer picture of what the next year has in store for owners, we developed a special edition of the 2021 Autodesk Construction Outlook: Risk & Opportunities report. The outlook combines external economic data from sources such as Dodge Data & Analytics with Autodesk’s own aggregated, anonymized BuildingConnected product data to uncover the evolving state of the industry.
To highlight the top risks and opportunities for owners uncovered in the report, we also created an infographic. Read on and view the infographic for valuable insights and key takeaways for owners in the construction industry. View full size infographic here.
Project Restarts on the Rise
Projects delayed or derailed in 2020 are getting back on track. The construction industry is expecting to see a 6% increase in nonresidential projects and a 10% increase in non-building infrastructure projects this year. In addition, the total starting construction project backlog is down 10% for 2021, and is projected to be down 5% for 2022.
Risk: Schedule Slippage
Owners should be aware that design risk has been on the rise for several years due to increasing complexity. This, in turn, can lead to project schedule slippage. Moreover, labor shortages have put pressure on project schedules, causing delays. In fact, 52% of construction firms report having difficulty finding qualified hourly craft workers to hire according to data from the Associated General Contractors of America (AGC). Lost time due to the decrease in labor supply can set projects back, leading to delays in operations and loss in overall profitability on projects.
Opportunity: Connected Construction Technology
To reduce risk, owners should adopt a connected construction technology platform that can be used from the earliest design phases through operations. An open and cloud-based platform gives owners full transparency into their projects so facility teams can efficiently operate on day one.
Bid Activity Is Increasing
According to BuildingConnected data, there was a 36% spike in total bidding activity in January 2021 compared to a three-month pre-pandemic average. Moreover, January 2021 BuildingConnected bidding activity volume represented an all-time high on the platform. The volume of projects added to the BuildingConnected platform, which is used by more than one million construction industry professionals, as well as the volume of bid invitations have increased, which may be the result of delayed or rescheduled projects starting up again.
Risk: Subcontractor Default Risk
Defaults often rise when the construction industry moves from a period of reduced activity to a period of rapid growth. In a saturated bid environment, subcontractors could be bidding on and winning more projects than they can handle, posing a risk to owners.
Opportunity: Subcontractor Prequalification
Owners should utilize subcontractor prequalification tools to vet firms before awarding a contract. This way, owners can avoid awarding a project to a company that may not have the resources to take on any more additional work.
Supply Chain Uncertainty
The COVID-19 pandemic turned many things about 2020 upside down, but supply chain issues created outsized hurdles for the construction industry. There was a surge in supply chain uncertainty in 2020 that has carried over to this year. In the wake of the pandemic, more than 75% of insured contractors are more concerned or much more concerned about supply chain and material delivery impacts, and their effects according to AXA XL research. There are also elevated concerns on an enterprise level regarding supply chain issues generally.
Risk: Project Delays
As countless projects have been halted or disrupted due to the pandemic, supply chain issues have caused weeks-long setbacks and mounting costs for owners’ projects. In October of 2020, 42% of firms reported experiencing disruptions due to a shortage of construction materials, equipment, or parts needed on projects. Firms that manufacture many goods used in construction were temporarily closed in 2020, which halted production and caused supply chain delays. Disruptions caused by material availability and schedule issues could potentially cost owners millions of dollars in revenue if projects are not delivered on time.
Opportunity: Closer Collaboration with GCs
To better anticipate supply chain uncertainty and mitigate risks, owners and GCs should closely collaborate on material monitoring and management plans. These plans should include putting a point person or committee in charge of supply chain risk mitigation. Owners and GCs should work together to create strategies for clear and consistent communication, as well conduct a supply chain audit and implement a materials tracking program. With the help of project management and collaboration tools, owners will be more aligned with project stakeholders throughout the course of a construction project.
For even more industry trends and insights, be sure to download the 2021 Autodesk Construction Outlook: Risk & Opportunities report.