The commercial construction business continues to ride the wave of increased demand in 2021. The boom in both residential and commercial projects since the start of the COVID-19 pandemic has led to many supply chain issues.
The construction industry has been a bright spot in the economy over the past year. However, the market is at a point where manufacturing can’t keep up with demand, driving up costs that can be felt by contractors and consumers.
Additionally, as society regains a sense of normalcy after the pandemic, labor shortages can be found in every industry and construction is no exception.
To survive, construction firms will need to learn how to adapt to a new way of doing business.
Let’s look at the trends impacting the commercial construction supply chain and how general contractors can evolve to work around these obstacles.
Shortages, Costs, and Tariffs Wreak Havoc on the Industry
As of June 2021, material costs have risen by 24%, a steep increase that isn’t allowing contractors to easily pass the excess cost to clients. In some cases, material unit prices have even doubled.
The pandemic halted production for many global manufacturers that contractors in the U.S. relied on. Even as pandemic restrictions eased, facilities couldn’t operate at their normal capacity, making them unable to keep up with the demand.
Shortages and Rising Costs
Construction businesses are now looking to the same suppliers for materials and coming up short.
More than 75% of firms have reported commercial construction projects being significantly delayed or canceled due to supply chain issues, including unavailable materials or excessively high costs.
As a result, firms are now forced to provide bids with higher estimates, much to the dismay of developers, investors, property owners, and brokers. Only one in five contractors reported winning new contracts in the past two months.
Further price increases are predicted for the summer as more materials, such as PVC piping, steel, and gypsum, become scarce. And though we are just starting to see relief in lumber prices, analysts predict it will take at least a year for things to level out.
Changes in Trade Tariffs
Supply shortages can also be linked to tariffs put on some of the U.S’s biggest trade partners.
The Construction Association of America is now calling on the current administration to end trade tariffs, particularly with Canada and the European Union where aluminum and steel are exported. Though the administration has started negotiations with the EU, tariffs are not expected to be lifted before the end of 2021.
How can the Industry Adapt to Commercial Construction Supply Chain Issues?
Although these changes cause challenges, they also spark many ways for the industry to adapt and improve. The best option for the industry moving forward is to build a resilient supply chain.
To prepare for situations like a global pandemic, organizations should reevaluate their business models or perhaps take manufacturing and distribution into their own hands.
Nobody knows for sure if and when this situation will become manageable. To survive in this new economy, firms must learn how to plan and evolve.
To combat labor shortages, contractors should consider prefabrification, or assembling components off site. Items can then be transported and put together on the job site. prefabrification methods allow for more productivity in a shorter amount of time, and with fewer labor costs.
With commonly used construction materials drying up, construction firms can look into alternative materials such as Cross-Laminated Timber. CLT is a prefabricated wood panel that is commonly used for walls, flooring, and roofs. CLT is delivered to the job site, ready for assembly. The material is lightweight yet durable, easy to install, and doesn’t produce waste.
BamCore, a sustainably harvested wood alternative made up of bamboo, has also emerged as an option.
Emerging Building Methods
If the old way isn’t working, it might be time for something new. New technologies in the construction industry are emerging and firms should be early adopters.
Insulated Concrete Forms (ICFs), for example, are used to create the form for concrete pours. They are more energy-efficient and cut down on the time required to make steel or plywood forms.
From Building Information Software to new tools that allow for remote work, firms should be quick to implement new technology. Apps that update in real time can better help with meeting timelines, tracking budgets, and managing projects. Being able to anticipate challenges will help firms identify solutions with speed and accuracy.
Develop New Partnerships: KIRCO and KIRCO MANIX
Companies like KIRCO and KIRCO MANIX offer third-party construction management services to the industrial/advanced manufacturing, distribution, healthcare, retail, and community sectors. From development to construction, KIRCO and KIRCO MANIX’s goal is to minimize risk, drive aggressive schedules, achieve budget goals, and protect owners from unwanted “surprises.”
Founded in 1974, KIRCO is a third-generation family-owned and operated, award-winning commercial real estate investment, development, construction (KIRCO MANIX), and facility management organization.
Having planned and developed over 35 million square feet of real estate and $4 billion of successfully delivered projects across the country, KIRCO is a major developer from coast to coast and focuses on corporate real estate, healthcare, and senior housing.
KIRCO upholds an all-encompassing culture of safety and is committed to delivering projects within budget and on schedule. If you’re interested in working with us to develop your next project, reach out to learn more today.