Construction Industry Trends: August 2019 Roundup

Thirteen of the top 20 U.S. construction markets noted gains in commercial and multifamily construction starts during the first half of 2019 according to an Aug. 21 report from Dodge Data & Analytics. But for the other seven markets, including the top-ranked New York metropolitan area, saw business soften. New York dropped 8 percentage points to just over $15 billion in new projects. Overall the total new starts across the United States in the first half was down 6 percent to $101.4 billion. Some markets did see dramatic jumps in new starts, including Cincinnati with a 130 percent increase to $1.38 billion and Nashville with a 112 percent increase to $2.23 billion. The second-ranked Washington D.C. market saw a 50 percent increase to $7.1 billion. “Office construction starts in 2019 have seen modest expansion compared to last year, helped by groundbreaking for large office projects and the support coming from the continued strength of data center projects, said Robert Murray, chief economist for Dodge Data & Analytics. “Hotel construction has stayed close to last year’s pace, but warehouse construction has begun to slip and store construction has seen further declines.”

The Takeaway: It’s great to see the surge of projects in a majority of the United States’ top markets. But the overall trend is something to watch closely. As concerns of a recession looking like they’ll soon become reality, some investors and owners are delaying projects or slowing work — instead preparing for potential economic downturns. Many contractors are busy lining up as much work as possible, as well as developing game plans for how to ride out any potential downturns better than they did during the mid-to late-2000s recession. Among the strategies: putting funds aside to float the business during work shortfalls and investing in construction technology and software upgrades now that will help save operating costs during the downturn and better position the company to compete when work picks back up.

Construction Dive recently ran an intriguing article on using technology to thwart construction fraud. In that article, Angela Morelock, managing partner and forensics experts at BKD LLP, noted that as much as 6 percent of annual industry revenue is lost yearly to fraud. Some 42 percent of all fraud cases involve corruption including bribery, kickbacks and bid rigging, while 37 percent of cases involve billing or accounts payable scams. Viewpoint Chief Product and Strategy Officer Matt Harris, also interviewed for the article, pointed to features of modern cloud-based construction software that are helping to stave off fraud. Among them, encryption, a secure cloud environment, workflow rules, three-way matching for material and other purchases, payment tracking, subcontractor approval and verification.

The Takeaway: While construction may not be as vulnerable to fraud as other industries like banking or healthcare, in a $1.2 trillion industry, losing 6 percent to fraud is a pretty big deal. It underscores what Harris noted in the article: that having modern technologies in place that streamline processes and tighten controls is essential to thwarting fraud. As Harris noted, what Viewpoint’s industry-leading construction software solutions do “is provide very tight workflows, approval chains and audit trails for processes … that would otherwise [leave] opportunity for fraud.”

A $7.5 billion project by REIT Bleutech Park Properties, Inc. will break ground in Las Vegas in December. The Bleutech Park Las Vegas will be a multi-use property that features net-zero buildings within their own insular mini city. The project is expected to create more than 25,000 jobs and train workers on the latest technologies. Among those that will be heavily used during construction are: automonous vehicles, artificial intelligence, augmented reality, robotics and the Internet of Things (IoT). “Bleutech believes in the rise of digitization and robotics in construction as this will increase productivity and efficiency,” said Bleutech Park Properties, Inc., CTIO, Bertrand Dano. “Wearable technology will increase workplace safety, particularly in heavy lifting and repetition. We believe in the future of robotics and their ability to improve jobsite safety and employee’s health.” The project will create renewable energies from solar, wind, water and kinetic supplies and all glass used will be photovoltaic, turning them into additional solar panels. The project will also feature smart buildings equipped with self-healing concrete and breathable materials and provide self-generated waste treatment, air and water purification and more. In other emerging tech news, Forbes featured an article this month about contractors turning to robotics to replace work once done by skilled workers and the ultimate effect it will have on the construction industry’s labor shortage.

The Takeaway: This is a shining example of the types of construction concepts that are going to become more of the norm soon. Clearly contractors that have modernized their own operations and embraced use of emerging technologies are going to enjoy the fruits of labor that these types of projects provide. What is even more appealing about this particular project if that it aims far beyond today’s LEED and green building standards, raising the bar for what tomorrow could hold.

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