Think Ahead with Shortages in Mind

Anyone planning construction for 2022 need to be aware of the continuing materials shortages and leave extra time and budget to manage the challenges.

With both residential and non-residential construction activity at a 10-year high, the battle for materials and resources continues to intensify across the sector.

As expected, the demand for almost all construction materials and their costs have continued to rise over the last quarter of this year.

Based on current forecasts, the situation will likely continue throughout the first two quarters of next year.

Driven by both domestic construction and international markets, both of which have activity at record highs, the supply chains are continuing to struggle to service the insatiable demand for key items.

In Australia, one of the key factors driving the ongoing price escalation locally is the impact that the US construction industry is having on supply markets internationally.

We normally import a significant amount of material and products into Australia to cater for the construction market. With an average level of productivity, advanced orders are typically enough to service all markets, but this situation has changed.

In addition to our own 10-year highs, the level of construction activity in the US is experiencing almost 50-year highs. The annual construction completed there to June 30 2021 was a staggering $1.5 trillion compared to Australia’s $30 billion.

The forecast for the US market is that it will continue to build throughout most of 2022 before it peaks during the last quarter of the calendar year.

What this will mean for us in Australia is that the current supply challenges will continue or worsen well into 2022, and likely beyond.

Not only are shortages increasing prices but, in most cases, lead times are being stretched and some materials are becoming increasingly hard to secure.

Contractors are now competing to get essential supplies & secure the resources to complete the work. Almost all key stakeholders within a project lifecycle are being affected by the lack of resources on the ground.

Increased volumes of activity across both residential and non-residential construction locally is putting a significant amount of pressure on available resources for both subcontractors and principal contractor as they fight to manage construction timelines with limited material and limited people to deliver the work.

While the market is busy industry wide, there are also a variety of larger marquee projects in each state that are reaching their busiest period. This is creating a vortex-like effect as they lure workers out of the sub-markets and into the tier 1 space.

Managing risks in 2022

The construction industry is an extremely dynamic environment and great results rely on good teamwork.

Bringing together hundreds of subcontractors and suppliers, who have often not worked together before, to deliver a building is always a challenge.

With the added complexity of both material and resource shortages the environment for all contractors is going to be challenging and, in many ways, unprecedented.

Advice from the Rohrig Group is to be aware of these market conditions and the affect it is having on contractors large and small.

Engage with your building partners early and include them in your early planning process so that you can get a sense of the current and emerging market risks and how you might need to approach the project differently.

Most importantly, be mindful of the time you need to allocate for each project and, wherever possible, allow more time than you normally would. You will almost certainly need it.

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