By Ed Avis
Reprographics firms serve many industries these days, but the AEC industry is still the core market for most of them. How will that industry do in 2024? There is no shortage of opinions. Here are what some key prognosticators have to say.
AGC Says Public Works Lead the Way
The Associated General Contractors of America (AGC) surveyed its members about their feelings for the year, and they reported that the public sector and manufacturing look solid, though other areas are weaker.
“2024 offers a mixed bag for construction contractors: on one hand, demand for many types of projects should continue to expand and firms will continue to invest in the tools they need to be more efficient,” said Stephen E. Sandherr, the association’s chief executive officer, in a press statement. “Meanwhile, they face significant challenges when it comes to finding workers, coping with rising costs and weathering the impacts of higher interest rates.”
The survey’s net reading—the percentage of respondents who expect the available dollar value of projects to expand compared to the percentage who expect it to shrink—is positive for 14 of the 17 categories of construction included in the survey, as it was in 2023.
The highest net positive reading in the 2024 survey—32 percent—is for water and sewer construction. The net reading for federal projects is 29 percent. The highest expectation among predominantly private-sector categories is for power projects, with a net reading of 25 percent. Close behind are the readings for hospital construction, with a net of 23 percent, and non-hospital healthcare facilities, such as clinics and medical labs, with a net of 22 percent. The largest increase in optimism from the previous survey is for data center construction, with a net positive reading of 20 percent. That is up from 12 percent a year ago. Contractors are optimistic, as well, about the education sector. The net reading is 18 percent for kindergarten-to-12th -grade schools and 15 percent for higher education construction.
Dodge Says 6 Tough Months, Then Better
Dodge Construction Network (DCN) agrees with the AGC in terms of the growth in public projects, but says the first six months of 2024 may be tough.
“In 2024, DCN predicts U.S. economic growth will slowly begin to improve as inflation subsides and the Federal Reserve begins to lower interest rates,” the organization wrote in its Outlook 2024 Report. “During the first six months of the year, however, the nation’s economy will need to weather several potential storms, such as an extended government shutdown, potential new union strikes and higher energy prices due to the conflict between Israel and Hamas.”
Despite the rough start to the year, DCN expects public works to grow 17 percent to $270 billion, thanks largely to the $1.2 trillion Infrastructure Act. The only potential problem the report cites is if chaos in Congress prevents action on appropriations bills.
Another strong segment in 2024 will be manufacturing construction, the report says. This work is also being fueled by federal money, including the CHIPS Act, which supports the semiconductor industry, and the Inflation Reduction Act, which seeks to improve supply chains and bolster investment in domestic manufacturing. The only risk DCN sees in this segment is construction labor shortages, which could stall or delay jobs.
You can download the whole report here: https://www.construction.com/resource/outlook-2024/
ABC: Worker Shortage Could Dampen Growth
The Associated Builders and Contractors (ABC) measures the strength of the construction industry with its Construction Confidence Index, a measure of how its members feel about sales, profit margins and staffing levels. The group reported that all three of those categories were above 50 percent in the December survey, which means things look good for the first half of 2024.
“Collectively, contractors experienced an uptick in optimism during the holiday season,” said ABC Chief Economist Anirban Basu. “Credit conditions eased a bit during the last days of 2023 as the Federal Reserve indicated that its next set of moves will be to reduce borrowing costs. That may have rendered project financing a bit easier, translating into both improved backlog and more optimism regarding sales, employment and profit margins for the for the first half of 2024.”
However, ABC warns that some issues could eat into the success, particularly a shortage of construction labor. Among the factors that are negatively affecting construction employment levels are an aging of the construction workforce – 1 in 5 works is 55 years old or older – several “megaprojects” that are taking up a large number of workers, and a general lack of appeal for construction work among young people, meaning too few of them are entering the field.
“While construction employment is growing, it is not growing fast enough to meet the demand to complete the work on the books for 2024,” said said Michael Bellaman, ABC president and CEO, in a press statement. “To address this shortage and grow the construction talent pool, ABC has a network of more than 800 apprenticeship, craft, health and safety and management education programs—including more than 450 government-registered apprenticeship programs across 20 different occupations. To address workforce demand that drives the U.S. economy, Congress must also look toward much-needed reforms to our legal immigration system and provide high-demand industries, like construction, with access to new or expanded visa programs.”
AIA: Weaker Conditions in 2024
The American Institute of Architects measures future construction growth by combining the outlooks of several other leading organizations, including Moody’s Analytics, FMI and Wells Fargo. The consensus among those groups is that the year will see less growth than 2023.
“After increasing by more than 20% last year, spending on nonresidential buildings will see a much more modest 4% increase in 2024, at a pace that will slow to just over 1% growth in 2025,” according to the January 2024 AIA Consensus Construction Forecast. “Spending on commercial facilities will be flat this year and next, manufacturing construction will increase almost 10% this year before stabilizing in 2025, and institutional construction will see mid-single-digit gains this year and next.”
The group says that government spending will help the industry this year, but that may be offset by tight credit, higher input costs and falling property values.
Read much more detail here: https://www.aia.org/resource-center/january-2024-aia-consensus-construction-forecast
So what does this all mean? Nobody thinks 2024 is going to be gangbusters, but there should be plenty of AEC work nevertheless. Hopefully that will translate into a decent year for reprographics.