If you work in the construction industry or know anyone who does, you’ve had a front-row seat to one of the wildest business cycles in memory. From supply chain issues that sent material prices soaring during the pandemic to whipsawing interest rates that played havoc with construction volumes and schedules, it has been a period to remember.
It’s not done yet. The “new normal” still feels very abnormal, and 2024 is shaping up to be very interesting indeed.
Here are four trends construction pros are watching right now and what they could mean for the rest of us.
1. Building Efficiency Is Having a Moment
Building efficiency is booming right now thanks in large part to a menu of new tax credits and funding opportunities authorized by the Inflation Reduction Act (IRA). These credits offer direct financial benefits for homeowners, commercial property owners, and land developers alike.
Although the IRA authorizes most credits through the early 2030s, building efficiency experts like ABB’s Karim Allana expect a surge in energy-efficient retrofits in 2024. This trend could help support a construction industry that’s otherwise struggling due to high interest rates and leftover pandemic-era supply chain challenges.
2. Sustainable Building Materials Are Poised to Attract More Investment
Closely related to the expected rise in efficient retrofits is the projected increase in the share of sustainable building materials used in both new construction and renovations to existing structures.
For example, recent advances in high-strength timber products make it feasible to construct much taller structures with predominantly wood-frame bearing. These so-called mass timber structures have already popped up in places as diverse as Norway and Wisconsin. Look for more project announcements (and groundbreakings) in 2024.
3. Modular Construction Could Reduce Labor & Material Costs
To many non-experts, “modular construction” implies cheap, shoddy workmanship. But this couldn’t be farther from the truth — and 2024 could be the year that the tide of perception finally begins to turn.
Because it requires less onsite labor and largely takes place in climate-controlled factories, modern modular construction is more efficient and in many cases cheaper than traditional “stick-built” construction. It’s often faster as well, particularly when builders would otherwise source materials from faraway suppliers.
4. Infill Could Struggle, But Greenfield Development Continues Apace
In the construction business, some developers and building contractors specialize in “infill” development within mostly or fully built-out communities. Others specialize in “greenfield” development on formerly agricultural or raw land, typically farther from city and town centers.
As interest rates rose and labor and material costs increased through 2022 and 2023, many infill developers struggled. This trend will continue through 2024 and probably beyond, even if interest rates start to come down. The market for downtown office space is particularly challenged, and the multifamily niche is showing real signs of pressure too.
Greenfield developers haven’t exactly had it easy, but their business isn’t down as much lately. It should prove more resilient in 2024 as well. The markets for greenfield residential and industrial builds look especially promising.
Watch This Space
If construction pros know one thing, it’s that this is a volatile and unpredictable industry. Those with the discipline to stay in the game through multiple business cycles — especially the one we’ve just been through — deserve respect if not admiration.
Many of these seasoned professionals are apprehensive about what the future could bring, if not downright nervous. Uncertainty hangs over the construction business right now, and most expect it to take years to dissipate (if it ever does).
For now, construction pros are doing what they do best: preparing for what (might) be coming. The rest of us should watch this space.
Alana Groom
Bella Duckworth
Ella Summers
Karin Hoover
Linjo Joson
Molly Milson
TraceyC