Page 25 - BusinessWest December 8, 2021

Continued Momentum
Nationally, Construction Industry Prepares for Another Busy Year
The engineering and construction indus- try has made a significant recovery from the 2020 recession, but it has also expe-
rienced multiple headwinds that are expected to persist. According to a report by Deloitte, 2022 should be another rewarding — but chal- lenging — year, and the industry looks to be poised to capture growth opportunities.
“The 2020 recession was among the shortest ever, but its impact continues to be observed across both the larger U.S. economy and the engineering and construction industry.”
The 2020 recession was among the shortest ever, but its impact continues to be observed across both the larger U.S. economy and the engineering and construction (E&C) industry.
In 2022, as we move into the second year of recovery, the industry has a big role in support- ing the nation’s growth plan. The Infrastructure Investment and Jobs Act (IIJA), with investments across healthcare, public safety, and other public
infrastructure, is expected to bode well for E&C firms and is likely to accelerate recovery across the non-residential segment. The residential seg- ment is expected to stay strong and exhibit simi- lar activity as it did in 2021.
The industry has increased its investments in digital, including through mergers and acquisi- tions (M&A), as it prepares to shift toward con-
nected construction capabilities. These technologies can help E&C firms support initiatives such as smart cities, urban
air mobility, and climate-change pro- grams, while helping to enhance internal operational efficiencies, reduce costs, and improve margins. Thus, 2022 is likely to be an exciting year for the engineering and construction industry, and Deloitte’s annual outlook explores five key themes to watch closely.
1. Several factors position the industry for strong growth amid the headwinds. The indus- try responded very well during the pandemic and has come out strong in the recovery period. Total construction spending recovered and peaked at $1.57 trillion in July 2021, 12% higher than 2019 average levels. In a recent survey, 91% of E&C respondents characterize the business outlook for their industry as somewhat or very positive,
23% higher than last year. Driving this business confidence is the expected strong performance of the residential segment and growth from the non-residential segment due to the $1 trillion IIJA.
Looking into the two segments in more detail, residential activities continued to stay strong despite rising material prices and the spread of the coronavirus Delta variant. In contrast, non- residential segment spending growth remained weak for much of 2021. Spending across edu- cational, office, transportation, healthcare, and commercial facilities observed the largest year- over-year decline in July 2021.
2. Supply-chain disruption and sourcing challenges will likely affect project delivery and margins. During the second half of 2020, the pandemic exposed the vulnerabilities of global supply chains. Supply issues were expected to stabilize moving into 2021 as both global produc- tion resumed and supplies normalized. However, pandemic-induced supply shortages persist, affecting key materials such as lumber, paint and coatings, aluminum, steel, and cement, among others.
Momentum
Continued on page 30
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