The 38th Annual AICPA & CIMA Construction and Real Estate Conference covered a broad spectrum of topics on accounting, tax, legislative and industry-based information.
Artificial Intelligence
The speaker at the AI session explained the distinction between deep learning and generative AI: deep learning turns data into information, whereas generative AI (ChatGPT) turns knowledge into wisdom. Some key pieces of advice from the session on where AI can be implemented in the construction industry included:
- Taking a look at processes that create the most mistakes and have the most redundancy
- Utilizing AI to consume and summarize data
- Instead of a top-up review, taking a bottom-up review
- Ultimately, we are moving from what machines can “do for us” to what machines can “be for us.”
Workforce
From the AGC survey, companies stated that it has been challenging to find candidates for 86% of salaried positions and 88% of craft positions. The impact of this demand causes “wage compression” with two types:
- When the pay rate of an inexperienced hire increases faster than that of an experienced employee. Think of hiring a new person with no experience who will make more than someone who worked for you for several years.
- When you hire experienced personnel, their salary compared to your team upsets the apple cart.
These items are at the forefront of all your hiring decisions.
Economy
Some key insights from an economic perspective included:
- Increased cash in circulation coupled with higher interest rates will have a lagging impact on the economy.
- The CPI index has come back into historical percentages. However, inventories are increasing to historical highs.
- The US office vacancy rate is 12.5%, but over the next 2 years as leases come up, that number will go up, given that 68% of today’s workforce want to work from home.
Construction Industry Outlook
From a construction perspective, the industry outlook was broken into three segments:
First was 3-5 years, where evidence suggested both bulls and bears have compelling arguments. The amount of forecasted construction spending is at an all-time high. However, while the historic increase is indeed positive, adjusting for inflation reveals that it hasn’t gone up by a lot. Construction has a positive forecast, but when you drill down into segments, some are positive, and some are negative. Positive segments are transportation, power and highway/street. The negative ones are multi-family, commercial and lodging.
The second was 7-10 years where the new and old economies will be present, and construction will follow. Population increases in urban settings change the dynamics. While the old economies focused on being in the office, banks, sports/recreation and shopping malls, urban living causes a faster-paced lifestyle, characterized by processed foods, boosting big pharma and online purchasing. Work is increasingly computer-based, requiring computer chips, power and data centers.
The long-term segment is defined as 10-15 years, with a focus on megatrends and their consequences. Big companies will follow the big dollars. The three consequences are bigger, faster and better.
- Bigger – megaprojects will consume an increasing share of construction spending. The pipeline of mega projects is projected to increase from 10% in 2020 to over 20% by 2023.
- Faster – project schedules will continue to compress. Nonresidential projects over $25M have shortened the timeline over that past decade by 12 months.
- Better – alternative delivery will become normal delivery. Industry stakeholders consistently identify the ability to deliver a project in an expiated manner as a main driver of alternative delivery method utilization.
The construction industry will be impacted by technological advancements, remote and flexible work, e-commerce and digitization, climate change and sustainability and political polarization. Can you imagine design in-house with AI? How about no employees but teams for a single job? Maybe the construction site becomes an assembly site of modular and prefabrication items. How about converting all equipment to electric and monitoring emissions and waste?
This has been longer than a typical postcard, but, when it comes to the future of construction, there are a lot of variables to unpack. I would like to hear your perspective on it.
