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By Willow Aliento
November 26, 2018
The latest Rider Levett Bucknall International Report has highlighted labour shortages as a growing concern for the construction sector across all advanced economies.
“Over the past 20 years, employment trends for the construction industry in these regions illustrate a workforce that is ageing,” RLB Global Chairman Stephen Mee commented. “The need to engage, train and retain skilled workers within the industry has intensified.”
The Q4 2018 report noted that in the USA, Australia and New Zealand, the percentage of workers aged 24 years or under has declined, while the percentage of those aged 65 or over has increased. This might mean the industry is facing the ageing out of its most skilled people, with insufficient new talent coming in to replace them.
The most dramatic shift in workforce composition has been seen in Canada. The percentage of construction workers aged 55 and over has almost doubled between 2004 and 2017. The percentage of workers aged between 15 and 24, on the other hand, has remained constant.
In the U.S., there are also some specific concerns regarding the impact of government immigration policies on the nation’s construction workforce. In its Q3 report specifically on the North American market, RLB noted that employment is at a 10-year high, and unemployment in the industry is at an all-time low as “the shortage of skilled and unskilled labour is one of the key inhibitors of additional growth within the sector.”
In terms of the industry’s bottom line, the Q4 International Report forecasts that construction cost escalation around the world is likely to be higher in 2018 than the uplifts of 2017. More than half of the firm’s global offices are forecasting Tender Price Index annual increases for 2018 over 2017 levels.
Looking ahead, however, global forecasts for 2019 show 46 per cent of offices predicting lower uplifts compared to the expected 2018 levels.
In the USA, San Francisco and New York remain the most expensive cities to build in; they are also respectively the second and third most expensive globally. Only Oslo in Norway has higher construction costs.
Costs are predicted to continue to rise across almost all USA and Canadian cities. Nevertheless, the rate of Tender Price Increase [TPI] is expected to be slightly lower in 2019 for the majority of North American locations. Phoenix, Chicago and San Francisco are the exceptions, though—the annual TPI rates are expected to exceed six per cent.
Rising Construction Costs
In Australia, the picture is a mixed one, with demand pressure seeing Sydney and Melbourne expecting the highest annual TPI rates. Adelaide is also seeing some increase in construction costs due to rising demand, driven in part by a growth in public sector projects and civil construction.
By contrast, costs have been falling in Perth, both in terms of overall construction costs and its predicted TPI—the slowing of the resources boom continues to impact building activity. RLP says Perth has now experienced three consecutive years of minimal construction cost increases due to declining market activity.
Although there are signs on some recovery ahead as office leasing activity has increased, any real movement in terms of construction volumes rising is not expected until 2019.
The report said that limited availability of resources in Sydney has become a major issue. Both design consultants and contractors are struggling to secure staff to undertake new projects or expand their businesses. Moreover, the considerable demand for tradespersons is also putting pressure on trade pricing.
NZ Construction Demand Strong
A strong pipeline of construction work in New Zealand throughout 2018 is driving construction cost increases, with Auckland expecting a six per cent rise for 2018. RLB notes this cost escalation is significantly above the nation’s annual inflation rate.
Wellington is also showing strong market dynamics.
Overall, the report said the level of activity and construction demand across NZ remains strong. Growth is, however, “hampered by continued capacity and financing constraints,” with labour shortages also an ongoing concern.
skilled labor shortage
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