In today’s construction news, read about how the pipeline for new development increased gradually from one quarter to the next as franchise businesses and developers overcame immediate obstacles while looking toward the future. On the other hand, there are various reasons for the labor shortage in the construction industry, including the pandemic, changes in American cultural values, and workforce demographics.

The U.S. Construction Pipeline Continues to Be Steady

Original Source: LE: U.S. construction pipeline remains steady

According to Lodging Econometrics (LE), the hotel construction pipeline at the end of the second quarter was 5,572 projects/660,061 rooms, up 7% YOY for projects and 6% for rooms.

As developers and franchise firms overcome short-term issues and look ahead, the building pipeline increased QOQ. In recent months, inflation, increased interest rates, and developers’ “wait and see” mentality have dominated the economy, but developers continue to believe in the economy’s long-term resilience as seen by pipeline growth. Q2’s pipeline was 5% below its peak. Despite certain obstacles, hotel developers are securing attractive building sites now and in the coming months.

The economy and hotel business are benefiting from rising consumer confidence and sentiment, which has boosted guestroom demand. With substantial visitor demand through August and the start of the fall conference season following Labor Day, this robust demand is projected to continue through the summer and into the fall.

Projects under development increased 10% and 8% YOY to 1,062 projects/141,681 rooms. At the end of the second quarter, 2,232 projects/260,595 rooms were slated to start construction in the next 12 months, up 11% and 12%, respectively. This shows that projects are moving forward and developers are seeking funds to “get into the ground.” The early planning stage finished Q2 ’23 with 2,278 projects/257,785 rooms. The second quarter is the tenth consecutive quarter with more than 200,000 rooms in early planning.

At Q2, 62% of the U.S. construction pipeline’s projects and 57% of its rooms were upscale and upper-midscale. These two chain scales constitute 63% of the projects and 57% of the rooms projected to launch by year-end 2023 and are likely to have the highest guest room growth rates through 2025.

At the conclusion of 2023’s second quarter, announced renovations and brand conversions totaled 1,939 projects/253,473 rooms, with upscale, upper-midscale, and economy brands accounting for the majority of these projects.

Extended-stay hotel projects in the U.S. have increased consecutively for eight quarters. 2,083 extended-stay projects with 214,557 rooms were in the U.S. hotel building pipeline at Q2 closure. Extended-stay projects make up 32% of the pipeline’s projects under construction, 42% of those expected to commence construction in the next 12 months, and 36% of those in early planning across the U.S. In 2022, 130 extended-stay hotels debuted, adding 13,647 U.S. rooms. 180 extended-stay projects/18,713 rooms are slated to open in 2023. The extended-stay category is expected to open 236 projects/24,281 rooms in 2024 and 319 projects/32,798 rooms in 2025. From 2022 to 2025, extended stay growth is 2.5 to 3.5 times industry growth.

In the first and second quarters, 224 new hotels with 27,194 rooms debuted in the U.S. In 2023, LE expects 384 projects/48,607 rooms to open for a total of 608 new hotels/75,801 rooms. New supply increased 1.4% in 2023. 2023’s year-end estimate is 22% higher than 2022’s 475 hotels/56,157 rooms. 700 new hotel projects with 79,422 rooms are anticipated to open in 2024, adding 1.4% to new supply growth. LE experts predict 808 projects/87,462 rooms to open in 2025, a 1.5% rise in new supply.

The Classic American Hard Hat Job Has the Most Available Openings Ever

Original Source: The iconic American hard hat job that has the highest level of open positions ever recorded

As it recovers from the pandemic and grows in tighter financial conditions, the U.S. economy faces a major labor shortage. Inflation and the labor market, where job opportunities have reached two per worker, continue to challenge organizations wanting to hire competent personnel. Construction has the tightest labor market.

Without building, Americans would have no place to eat, sleep, work, or live. The industry has the most unfilled job positions ever.

In 2023, non-union construction businesses would need to hire 546,000 more workers than usual to meet labor demand, according to Associated Builders and Contractors. In 2022, the construction business averaged more than 390,000 job postings per month, the largest on record, while unemployment was 4.6%, the second lowest.

Long-term labor force issue

The demand for houses, hospitals, schools, and other structures is outpacing the supply of employees. After Biden’s infrastructure plan passed, American communities have lots of money to revitalize their structures but no one to do it. According to ZipRecruiter data from April, online construction job applications dropped 40% at the start of the epidemic and have stayed flat since.

“Despite sharp increases in interest rates over the past year, the shortage of construction workers will not disappear in the near future,” stated ABC Chief Economist Anirban Basu in a February labor supply and demand analysis. 

Labor is scarce. Maria Davidson, CEO and Founder of Kojo, a materials management company, told CNBC’s Lori Ann Larocco that construction backlogs are at a four-year high and that 650,000 construction employees are missing.

The building industry is also encountering supply issues since the outbreak.

“The landscape has dramatically changed since February 2020,” Davidson added. Commercial construction materials prices have increased 40% since February 2020. Materials are scarce. Electrical and mechanical panels and equipment are almost a year late. And that’s made it very difficult for contractors around the country to procure the components they need and install them on time and on budget.”

Construction labor difficulties affect the economy.

“The biggest place we’re seeing it right now is in housing,” said Lightcast analyst Rucha Vankudre. “People aren’t getting what they want built.”

“If you’re building a big hospital project, for example, you might have locked in the timeline that you expected to complete something by back in 2019 and now be suffering the consequences of the materials disruptions that we’re seeing,” Davidson said.

Davidson further noted that “delays cascade”—when a contractor or construction company’s supply chain for one commodity is disrupted, it delays their next transaction or material procurement.

Construction pay is rising.

Construction job seekers have never had it better.

“They’re earning more. “It’s a workers’ market,” said Associated General Contractors of America’s Brian Turmail. “Construction pays 80% more than the average non-farm job in the US.” 

There is always work and the chance to gain extra money working overtime.

Turmail attributed the lack on an aging workforce. Due of its physical nature, workers retire earlier. Construction companies are encouraging retirees to become trainers or professors. 

Despite these pro-worker policies, a shift in American work ethic has made the field less appealing to job seekers.

“Cultural,” Turmail remarked. “Mom doesn’t want her babies to be construction workers. For 40 years, we’ve preached that a four-year college degree in an office is the only way to succeed in life. 

Construction has the second-highest rate of workplace deaths, according to the U.S. Census Bureau.

Vankudre said the shortfall will persist until the U.S. government and construction industry can persuade young people to pursue construction careers. 

Money to build, not to recruit and train.

Turmail says this begins in schools. 

“Firms are realizing that only they can solve the problem. They’re strengthening partnerships with middle and high school programs. Turmail said they’re getting students to construction job sites to expose them to career opportunities.

Construction enterprises are not the only ones recruiting. LIUNA is trying to reach more potential workers.

“We have a lot of different programs to bring new people into the construction industry,” said LIUNA spokeswoman Lisa Martin. “Whether they’re justice-involved, bringing more women in, we have pre-apprenticeship programs, we help high school students graduate with skills to start apprenticeship programs. We have several ways to get more people into good-paying jobs.”

Changing the construction workforce’s demographics could reduce the labor deficit. 

Turmail said construction is confronting labour shortages with one hand tied behind its back. “Women are half the workforce, but they’re somewhere around 6% to 7% of the craft workforce, the men and women who actually do the construction work in hard hats and boots. If we can boost those percentages, we won’t even be talking about labor shortages.” 

Construction also relies on immigration policies. 

According to U.S. demographics, we lack workers. “We won’t for a long time,” Vankudre stated. Since we can’t produce additional workers, we should import them. And I think it will really alleviate the squeeze we’re seeing not just in construction, but really the broader economy.”

“We should also be looking at ways to allow more people to lawfully enter the country and work in construction careers, whether that’s a temporary work visa program that’s specific to construction, or broader comprehensive immigration reform—that needs to be part of the conversation about labor shortages in the construction industry,” Turmail said. 

President Biden’s infrastructure bill exacerbates the problem by allocating funds for infrastructure improvements but not for recruiting or training new construction workers. Davidson claims this has exacerbated the pre-bill labor scarcity. 

Vankudre said more money will be needed to train more individuals and bring them into the business. “Because otherwise we are going to hit a point where we’re just not building the things we want to, not because we don’t have the money, but because we don’t have the people.” 

Summary of today’s construction news

In conclusion, the ongoing expansion in the pipeline shows that developers still have faith in the economy’s long-term strength.

On the other hand, experts agree that the best course of action is to strike a balance between immigration laws, more technological advancements, and initiatives to promote careers in construction.