The importance of the AEC industry for economic growth in 2022 and beyond
Why is the AEC (Architecture, Engineering, Construction) industry so important to the US economy? The AEC industry represents the planning, design, construction and maintenance of the building blocks of our communities. Buildings, roads, bridges, airports, railways, ports and all of our infrastructure would not exist without the AEC industry. It also means that there would be no offices, factories, stores or warehouses/distribution centers. These and other buildings are the fundamental foundations of a strong economy.
The significance of the economic impact of the AEC industry will be even greater after the pandemic. The outlook for the industry in the United States is for positive growth for 2022 and beyond. One of the main factors behind this positive opinion is the Infrastructure Investment and Jobs Act (HR 3684), which is a five-year, $1.2 trillion package providing historic levels of infrastructure funding.
Indeed, 2022 could be pinpointed as the start of several banner years, as much of the monumental new federal infrastructure spending is unlikely to hit the markets until year-end at the earliest. Yet it is wise to recognize that the pressure exerted by labor shortages, supply chain disruptions and high material prices could dampen growth.
The AEC industry should benefit from an improvement in the national economy as a whole. The economic outlook remains fairly optimistic, with several economists forecasting a projected overall economic growth rate in 2022 of between 3.5% and 4.5%.
The initial funding allocated by the recently signed infrastructure bill is expected to start impacting civil engineering companies at the end of 2022. Civil engineering companies will benefit from initial commitments requiring the study and design of infrastructure projects.
Architecture has always mirrored the creative, technical and technological expertise of a community over time. The enormous pressure of our growing American population has increased the value of land as a commodity. The type and extent of development planned on valuable land is driven by maximizing the economic potential of that land. Therefore, architecture can be a useful tool for the economic growth of a region.
Historic architecture has helped produce an important source of tourism revenue which improves the economy. People travel very far to see relevant places with historical backgrounds. Tourism also creates a need for maintenance and repair of historically significant structures.
The architectural practice of renovation or adaptive reuse of space means restoring the character of a building in a historically accurate way, but it is then used as a space different from its original purpose. This translates into increased revenue for the building, as well as the recognition it deserves from visitors around the world.
According to sources at Dodge Data & Analytics, a bullish long-term economic outlook for construction work is associated with infrastructure that will depend on the injection of new funding from the Bipartisan Infrastructure Deal.
However, the reality is that the outlook for the AEC sector is not all smooth in 2022. Supply chain disruptions will continue to interfere with project schedules and contribute to price inflation for various materials. construction in 2022 and probably in 2023.
The supply of many essential materials, many of which are needed for construction, has experienced shortages which have resulted in soaring prices for materials such as softwood lumber, oil, natural gas or other construction inputs. production.
Truck shortages and logistical congestion at ports continue to contribute to supply chain issues and the resulting inflated prices for building materials. Higher prices are now quite prevalent in most materials used in the construction space. There is a feeling that material prices will moderate rather than fall in the future.
A critical shortage of skilled labor continues to be a chronic problem in the AEC sector. It has been reported that there are currently just under 350,000 vacancies in the construction industry. This is a systemic problem rather than a temporary phenomenon and could certainly dampen housing starts in 2022.
The architecture and engineering trades are also impacted by the shortage of skilled labor and perhaps more serious than in construction. The current shortage of architects and engineers is the result of a combination of factors. A large number of baby boomers are retiring. These older, more experienced professionals are leaving the workforce, and architecture and engineering firms are struggling to replace them.
Companies are struggling to find suitable replacements for senior executives who are retiring. It is not possible to replace a 65-year-old architect or engineer with 40 years of experience with a junior architect or engineer fresh out of college. A baffling question has been raised as to whether companies will even be able to do the job due to the talent shortage.
Salaries in the AEC industry are growing faster than they have in many years due to the talent shortage. Thus, architectural and engineering firms find themselves faced with a dilemma. If companies do not raise their prices, it will significantly reduce profits. Professional fees have been artificially low for years in the AEC industry and there may now be some room to raise prices.
Architectural and engineering firms need to be diligent in ensuring they have the workforce they need to keep pace with growing job prospects. The focus may be on finding people to do the job rather than finding work in the next year or two.
Overall, the AEC industry can expect significant gains in 2022 and beyond. The profitability of companies in the sector should remain on an upward trajectory. However, it is essential to watch out for disruptors that can alter expectations.
Limited resources and the impact of development on our environment and society present ongoing challenges. Sustainability factors are paramount to project success in the AEC industry, from exceeding performance requirements to improving cost control. Sustainability must be “front and center” within the AEC industry to produce positive outcomes for society, the economy, and the well-being of our world and its people.