Our monthly construction industry trends report combines industry data with internal survey results from National Business Capital’s award-winning team. With extensive experience in the construction industry since 2007, we are pleased to share our latest findings and data with the community.
Our goal is to provide business leaders and decision-makers with the necessary information and data to make informed decisions in their business activities.
Residential Construction Sector Expenditure (2020 – 2024)
Homebuilding trends highlight industry performance in an extremely important industry and reflect broader real estate market trends.
Source: AGC
August 2024 – The construction industry has been struggling to create new inventory as homebuyers contend with rising costs. Multifamily construction spending has remained positive since 2020, while single-family home, private home and improvement project spending experienced a brief lull between September 2022 and January 2024. It’s a combination of housing trend factors.
Over the past 4-5 years, the value of single-family homes and private residences has increased rapidly, but the supply has declined significantly. Persistently high interest rates discourage sellers from switching from low rates to new mortgages, while increased demand pushes home prices higher. This has slowed the housing market in these sectors, driving construction activity toward multifamily structures, which are more popular as people rent rather than buy.
Houston, Texas, leads the U.S. states in new home construction in 2023. However, other areas, especially the Northeast like New York, have seen significant declines in home construction. For example, Rochester, N.Y., and New York State, for example, saw active listing changes of -4.90% and -14.20% from the same period last year, according to Yahoo Finance.
We believe this will not be a long-term trend. As the Fed lowers interest rates and more homeowners become comfortable with new mortgages, we may see a return to normal spending trends for single-family and private homes within the construction industry.
Source: Census.gov
Digging deeper into construction trends, we find that permits, starts, and completions follow a parabolic trend through 2024. . Although the highs from 2020 to 2023 are all much higher than in 2024, this expansion/contraction trend can occur in the January to July period in previous years.
This is an election year. With so much going on with the vote, new home permits may be on the decline as the housing market awaits the results in November. However, the stagnation in permits, coupled with slower growth across all residential segments, could also herald a more severe industry-wide contraction due to rising costs, declining confidence and a difficult economic environment.
Increased data center spending; private office construction suppressed (2020 – 2024)
As the Chip and Science Act continues to drive the industry toward data centers and other electronics manufacturing initiatives, understanding spending trends can unlock a unique perspective on industry priorities.
Source: AGC
August 2024 – As we mentioned in our July monthly report, CHIPS and the Science Act have significantly shifted the focus of the construction industry. Spending on data center construction has increased by about 10% since the beginning of 2024 and by more than 45% since the legislation was passed in 2022.
Government focus, along with changing perceptions of the need for business offices, has diverted spending away from private offices and other office construction. Commercial real estate, particularly the large corporate offices that characterize major city skylines, has seen a significant downward trend since the adoption of “work from home” policies following the pandemic.
Unless there are significant changes in how we think about face-to-face work and the focus on artificial intelligence development, these spending trends are likely to continue. Data center spending is also likely to decrease as facilities are finalized.
Construction Industry Recruitment Trends
Construction industry recruiting trends, including vacancies, hiring and layoffs, provide a unique perspective on the industry’s operating capabilities and highlight potential challenges.
Source: AGC
August 2024 – We examine employment trends monthly. Zooming out on the chart to see year-over-year employment trends provides a clearer picture of our overall progress.
Focusing on recruiting and job opening trends, it’s interesting to note that at inflection points, the data seems to change direction in one way or another. The inflection point in 2019 led to different trends, and the inflection point in 2021 has different results. Considering we just recently passed another inflection point, recruiting and vacancy trends are likely to see significant changes.
We hope to build positive relationships so recruitment and employment opportunities go hand in hand. It would be concerning if job vacancies exceeded hiring figures, as it would indicate industry-wide operational challenges.
But most notably, layoffs and layoffs in the construction industry are at their lowest point in more than 20 years. Job openings have increased significantly since 2001, reflecting the rapid expansion of the industry itself over the past two decades. Recruiting trends are slightly different. Recruitment has generally declined since 2001 but has remained relatively stable apart from a few spikes.
There is a lot to unpack when it comes to construction recruitment. Through 2024, some companies report that they are experiencing difficulty recruiting new employees due to growing labor demand, a lack of skilled/specialized workers, and an overall aging workforce. Others did not experience the same challenges, suggesting that recruitment issues are context-specific.
National Business Capital Building Review (August 2024)
Each month we provide a unique perspective on the short to medium term outlook for the construction industry. Our insights come from a combination of existing industry statistics, internal data and the overall sentiment of the construction clients we work with on a daily basis.
- Approval amount increased by 26.5% from July to August ——The approval of construction companies continues to be strengthened. Lenders are more confident about the industry as a whole, and applications from company to company are stronger, giving lenders more confidence. While the industry may have been grappling with post-pandemic challenges at the start of 2024, it’s clear that businesses have found their footing and hit the ground running.
- Construction funds increased by 21.49% from July to August – With more approvals in hand, construction companies are more confident in moving forward with approvals. Due to the increase in transaction amount and the increase in the number of conversion transactions, the total amount of funds increased by 21.49% compared with the previous quarter.
- Construction company financials increased by 15% since January 2024 – Stronger credit, higher revenues and higher profitability are characteristics of applications received by National Business Capital in August 2024.