The passage of the 1.2 trillion-dollar federal infrastructure bill was a real game-changer for the entire construction and real estate industry. While this influx of capital will fuel economic growth for the industry in 2022, supply chain, inflation and labor shortages continue to be top of mind. Here at DHG, we're excited for construction and real estate opportunities in 2022 and look forward to learning how we can adapt our industry experience and integration of tax, advisory and assurance services to help you perform better in the year ahead.
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The passage of the 1.2 trillion dollar federal infrastructure bill was a real game-changer for the entire construction and real estate industry. It should keep demand strong and will drive economic growth.
Of course, with this level of anticipation comes an almost equal level of concern related to supply chain issues, inflation and continued labor shortages. The construction and real estate industry is challenged with questions related to increased costs and available talent to perform work under contract.
Let's first look at some numbers for a better perspective:
When you look at October 2021 Year over Year, the consumer prices increased 3 times the federal target1 and the nonresidential construction price index climbed more than 20 percent2. Those are big increases, but bid prices rose only 12.5 percent or 8.5 points lower than CPI3.
And according to a recent study, the construction industry needs more than 2 million workers over the next three years to keep up demand – which could mean increasing wages to keep skilled workers4.
We expect price volatility is going to continue in the near term because a number of factors continue to put pressure on contract prices and margins.
Our approach at DHG is to collaborate closely with our construction and real estate clients and to put our industry experience to work for them.
For example, to help adapt to inflation, we have advised clients to consider alternative materials and products that may be more accessible and affordable – and compliment that approach by expanding their network of distributers and subcontractors to gain more flexibility for resources and to help control costs.
Other strategies to help mitigate supply chain and inflation issues can include scheduling longer lead times, developing price contingencies and warehousing materials for future opportunities.
Additionally, you may want to evolve your recruiting and compensation strategies to improve talent retention.
Here at DHG, we're excited for construction and real estate opportunities in 2022 and we look forward to learning how we can adapt our industry experience and integration of tax, advisory and assurance services to help you perform better in the year ahead.
1Consumer Price Index | bls.gov/cpi
2PPI Detailed Report Data for October 2021 I https://www.bls.gov/ppi/detailed-report/ppi-detailed-report-october-2021.pdf
3AGC 2022 Construction Inflation Alert I https://www.agc.org/sites/default/files/users/user21902/Construction%20Inflation%20Alert%20Cover%20-%20Feb%202022_000.pdf
4The HBI Construction Labor Market Report Fall 2021 I https://hbi.org/wp-content/uploads/HBI_Fall_Construction_Labor_Market_Report.pdf
2021 North American Engineering and Construction Outlook Fourth Quarter I https://fmicorp.com/insights/construction-outlook/2021-north-american-engineering-and-construction-outlook-fourth-quarter