Contractors’ outlook generally upbeat – Finance and Commerce

Minnesota’s construction industry is generally upbeat about the demand for construction services in 2022, but that optimism is tempered by the ongoing supply chain disruption, material costs and other worries.

That’s a big takeaway from the Associated General Contractors of Minnesota’s 2021 Minnesota Construction Industry Assessment, which asked builders, architects, engineers and specialty contractors to weigh in on market challenges and opportunities.

The survey, released this week, also shows that contractors are trying to improve the diversity of their workforces and business partners, though the respondents also report that a lack of “diverse talent” is a barrier to those efforts.

More than 150 businesses responded to the survey.

Last year at this the time, project cancellations and delays and other impacts related to COVID topped the list of concerns in the industry, said Tim Worke, CEO of AGC-Minnesota.

“What we’re seeing now is that those concerns have stepped back and have taken a secondary level, and the greatest areas of concern across all the sectors are things related to materials and availability, pricing, supply chain issues,” Worke said.

Overall, 31% of respondents said they expect market conditions to improve in 2022, up from 15% in last year’s report. About half of respondents say conditions will be unchanged. Notably, only 18% of respondents foresee declining conditions, down from 42% in 2020.

Asked how they expect specific market sectors to perform in 2022, respondents were most bullish about alternative energy, senior housing, heavy/utility and transportation. Commercial office and commercial retail got the lowest marks.

Highway contractors are especially optimistic about the coming year. AGC-Minnesota noted that the survey was conducted before the bipartisan $1.2 trillion federal infrastructure bill was signed into law.

Asked about factors expected to impact their business, 75% of respondents said they’re “somewhat positive” (61%) or “very positive” (14%) about project funding in 2022, while 82% are “somewhat positive” (69%) or “very positive” (13%) about technology changes.

Still, construction businesses are finding plenty to worry about. Respondents said the availability and cost of construction materials, lead times to obtain materials, vaccine mandates and workforce availability will have the most negative impacts in the coming year.

“In general, our members on the construction side certainly would be able to do more work and have more of a robust portfolio of work if they had more workforce available to them,” Worke said. “But you can do things to manage that, like double shifting and overtime.”

Despite the obstacles, construction businesses in Minnesota are more likely to add to their payrolls compared to a year ago. Sixty percent of respondents said they plan to do at least some hiring in 2022, up from 42.2% in 2020.

Top strategies for attracting and retaining workers include increasing compensation (74%), providing career development and training opportunities (63%), mentoring (59%) and offering flexible or remote work opportunities (45%).

On the equity front, nearly seven of 10 respondents said they are taking “deliberative measures” to “attract and retain people of color and women,” and 56% of those respondents said such efforts are “making a difference.”

Specific measures include having conversations about the work environment and culture, word-of-mouth referrals, referrals from existing employees, recruiting efforts at career fairs and offering bonuses for existing minority employees to bring more recruits onboard.

“If you’re intentional about it and you’re applying deliberate measures and you’re consistent in that intentionality, we’re starting to see our members say that those results are paying off,” Worke said.

Overall, however, respondents “continue to strongly indicate a lack of diverse talent in needed craft positions as their biggest barrier to increasing workforce diversity,” the report notes.

Rich Jacobson, executive vice president at Minneapolis-based Kraus-Anderson, said diversity is “very, very high on our priority list, if not at the top of it.”

Kraus-Anderson has gone to high schools, trade schools, and technical colleges, and has participated in initiatives like the ACE Mentor program to advance diversity and workforce efforts, he added.

As for business conditions, Kraus-Anderson expects things to pick up in 2022 as pandemic-delayed projects come back online.

“The last two years for us have been down a little bit from what we projected,” Jacobson said. “The good part is, the projects didn’t go away; they were postponed. And it appears that in 2022, most of them are going to start. So we’re going to see an increase in revenue for 2022 — at least, that’s what we’re predicting right now.”

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