While there are several reasons for U.S. construction businesses to be cautiously optimistic about 2024, there are also a number of reasons to simply be cautious.

In the U.S. overall, there’s an expectation for some growth (but not as strong as last year), with a hope that inflation and interest rates will decrease. Wages are up and unemployment is hovering around 3.5% to 4%. Lending is tightening and consumer spending is slowing down. The likelihood of a recession is anyone’s guess, although it seems less likely than it was a year ago. The situation is fragile, for lack of a better word, considering escalating geopolitical tensions and the fact that we’re in a presidential election year.

It feels like we’re playing Jenga and while we’re doing a good job keeping the business environment balanced, all it will take is one false move and everything can tumble. Moving slow and steady is key.

When it comes to construction, the Associated General Contractors (AGC) and Sage annual Construction Outlook Survey Results released last month provide valuable insights to help guide your business strategy for the year ahead.

As I reviewed the results, I didn’t see any big surprises, and I think the assessment of opportunities and challenges are right on target, based on what we’re hearing from clients and seeing in the industry overall.

Results show 64% of respondents are worried about rising interest rates and financing costs; 62% are worried about a recession or economic slowdown. Costs in general are among the top concerns for 2024, with both labor costs and material costs on the rise. Rising costs, interest rates, and reduced funding resulted in over 70% of respondents experiencing project postponements or cancellations in 2023.

When it comes to labor, 69% of respondents plan on adding staff and 77% are having challenges filling open positions. Last year, many raised pay, enhanced benefits and contributions to benefit costs, and added or increased incentives. Considering rising wages across industries, construction companies are likely looking at having to do even more to attract and retain talent, while addressing growing concerns about safety due to workforce inexperience.

While a growing percentage of respondents are investing in technology like drones, AI, and modular construction, the majority still aren’t on board. Does this mean there are still a lot of opportunities for construction firms to address staffing challenges by using technology to work more efficiently and effectively?

A higher percentage of respondents, but still not a majority, are also continuing to invest in software for accounting, project management, document management, and estimates. Again, this may open opportunities to eliminate non-value-added activities while operating more effectively.

I do appreciate that survey results are also broken down by region and state, as it does highlight differences by geography. For example, when calculating the net percentage of respondents expecting the value of warehouse projects to be higher or lower, results show an anticipated 10% net increase nationally; an anticipated 10% net decrease in the Northeast; and a 29% net increase in New York.

Some other differences to note…based on survey results, NY staffing challenges appear to be slightly lower than the national average. While both national and New York results show the top response to supply-chain issues is to accelerate purchases after winning contracts, nationally the second most popular response is to turn to alternative suppliers but in New York respondents are more likely to have specified alternative materials or products.

When it comes to project postponements or cancellations, New York respondents appear to be facing more challenges than most:

• Nationally, 34% of respondents indicated no projects scheduled to start in 2023 or 2024 were postponed or canceled; in New York, the result drops to 24%.
• Nationally, 37% of respondents indicated projects postponed in 2023 were rescheduled; in New York that drops to 24%.
• Nationally, 36% of respondents indicated projects that were postponed or cancelled in 2023 were not rescheduled; that jumps to 45% of respondents in New York.

Interestingly, nationally, a greater percentage of respondents indicated owners postponed/cancelled projects slated to start in 2024 than in New York. If you’re a glass-half-full person, you could take this as things may be looking up in New York…maybe.

As 2024 unfolds, please remember the professionals at RBT CPAs are here for you. Please don’t hesitate to give us a call and find out why businesses across the Hudson Valley and New York have entrusted us with their accounting, tax, audit, and business advisory needs for over 50 years. Hint: We’re Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.