Positive Outlook for 2016 Healthcare Construction Market

Seventy-one percent of construction firms plan to expand their payrolls in 2016 as contractors expect a range of public and private markets to grow, according to survey results released by the Associated General Contractors of America and Sage Construction and Real Estate. The survey, conducted as part of The Challenges Facing a Growing Industry: The 2016 Construction Industry Hiring and Business Outlook, indicates that contractors foresee a positive year despite tight labor conditions, regulatory burdens and IT security challenges.

Association officials noted that 71 percent of firms say they will increase their headcount in 2016. In most cases, however, that hiring will only lead to modest increases in the overall size of firms. Sixty-three percent of firms report their planned hiring will increase total headcount between 1 and 25 percent while 8 percent report they will expand their headcount by more than 25 percent this year.

Among the 30 states with large enough survey sample sizes, 95 percent of firms in Kansas plan to expand their payrolls in 2016, more than in any other state. Meanwhile, 25 percent of firms in Pennsylvania report they plan to reduce headcount this year, more than in any other state.

Respondents were positive about the outlook for hospital (19 percent net positive), private office (19 percent), multifamily residential (14 percent) and higher education (13 percent) construction. And they are optimistic about the prospects for K-12 school (12 percent) and public building (12 percent) construction, particularly in contrast to last year when contractors were generally pessimistic about all public construction market segments.

Construction firms continue to cope with shortages of available workers. Seventy percent of firms report they are having a hard time finding either salaried or craft professionals. And 69 percent of respondents predict that labor conditions will remain tight, or get worse, during the next 12 months.

Firms are responding to worker shortages by increasing pay and/or benefits. Forty-nine percent of respondents report they have increased base pay rates, 30 percent report they are providing incentives and/or bonuses and 23 percent report they have increased their contributions to employee benefits to retain or recruit workers. And nearly half of firms report they plan to increase their investments in training and development compared to 2015.

In addition to coping with worker shortages, contractors are also worried about the continued increase in healthcare costs. Seventy-nine percent of firms report the cost of providing healthcare for their employees increased in 2015 while another 81 percent expect their healthcare costs will increase in 2016.

Even as firms spend more on healthcare coverage, they are prepared to increase investments in information technology. According to the Outlook, 42 percent of firms report they invested at least 1 percent of their revenue in IT last year, up from 32 percent in surveys conducted over the past two years.

Contractors are also becoming increasingly savvy with their IT investments. For example, 42 percent report they already have formal IT plans in place while an additional 11 percent will put such plans in place in 2016. Likewise, 59 percent of firms report they use, or plan to use, cloud-based software.

Most firms are also using technology to collaborate on construction projects, with 71 percent using file sharing sites to share information with owners, subcontractors and other project partners and 40 percent using more sophisticated online collaboration tools.

As technology and the threat of cybercrime become more prevalent, many firms report they have to take steps to protect their IT systems. For example, 75 percent report they have an overall IT security plan and 46 percent have a security policy in place for mobile devices.

Beyond labor and IT challenges, contractors must also cope with new regulatory burdens. Thirty-nine percent of contractors report they are worried about the continued expansion of federal regulations while 34 percent report they are worried about the growth in state and local red tape, association officials noted.

The outlook was based on survey results from over 1,500 construction firms from all 50 states and the District of Columbia. Varying numbers responded to each question. Contractors of every size answered over 30 questions about their hiring, workforce, business and information technology plans. Click here for The Challenges Facing a Growing Industry: The 2016 Construction Hiring and Business Outlook report. Click here for the survey results.