After years of uncertainty, 2023 offered a window into a new normal for the construction industry – and despite lingering recession concerns, the industry and opportunity for growth are strong.
Over the past year, we saw landmark legislation unlock substantial funding for critical projects aimed at modernizing our nation's airports and enhancing our overall climate resilience. Manufacturers are urgently moving to re-shore operations to circumvent future supply chain disruptions. While a recession seemed all but certain in 2023, the country may have pulled off a “soft landing” after all – boosting consumer spending and instilling confidence in entertainment developers.
These trends are converging to create significant demand for megaprojects – landmark builds that exceed $1 billion in budget. Megaprojects often become the cornerstones of a contractor’s portfolio, and I expect they will define the industry in 2024.
Here are the construction sectors to watch as we embark on a new year.
The infusion of $25 billion of federal funds from the Bipartisan Infrastructure Act, coupled with a significant increase in consumer travel, resulted in a surge in aviation projects in 2023. Given that the average age of U.S. airports exceeds 40 years, I foresee a sustained demand for aviation projects in the near future.
After years of recovery, global airport travel is expected to reach 9.4 billion travelers in 2024, finally exceeding pre-pandemic levels. To meet the demand, airports are spending billions to increase their capacity to help guests reach their destinations efficiently and safely. Airports will continue to invest billions into new terminals and enhancements such as consolidated rental car facilities (CONRAC), while also modernizing their technology and guest experience. The growing adoption and understanding of the benefits of public-private partnership (P3) delivery method is further helping regional municipalities finance and break ground on airport mega-projects.
Investment in clean infrastructure continues to grow, with energy generated through solar panels, windfarms and other carbon-neutral methods expected to overtake coal-produced power as the world’s top source of energy by 2025. Government funding is helping to accelerate the transition – and build the demand for new solar field projects. The White House reports the private sector has announced $133 billion in investments in clean energy, partially motivated by the Inflation Reduction Act.
PCL Construction is on the forefront of this transition. To date, PCL’s Solar Division has designed over 60 ground-mounted projects that account for more than 4 gigawatts of solar energy (enough to power more than 600,000 homes), and four more projects are currently underway. Our solar division secured over $1 billion in new projects in 2023, with plans to expand our workforce by 25% to meet the growing demand for renewable energy construction over the next year.
Semi-conductors power everything from cellphones to cars, and East Asia produces 75% of the world’s supply. After decades of sending manufacturing facilities overseas, a new urgency to re-shore operations has resulted in manufacturing construction starts skyrocketing 156% over 2019 levels, according to data analysis from Construction Dive. The $39 billion in funding for manufacturing from the CHIPS Act is far from drying up, fueling growth in the sector. In 2022 alone, the U.S. completed $108 billion in factory construction.
Coupled with the Infrastructure and Reinvestment Act, this creates a perfect storm of U.S. smart manufacturing investment. With continued green energy investment in solar photovoltaic panel plants, electric vehicle and battery plants, the U.S. is on track to becoming the global leader in advanced manufacturing in the next 5-10 years. This will create good-paying, advanced manufacturing jobs and security for U.S. supply chains.
Despite economic uncertainty, Americans have consistently increased their spending on entertainment and travel, up 6% and 7% respectively over 2022, according to a recent report by McKinsey & Company. As a result, developers are continuing to invest in ambitious entertainment projects, with a new focus on geographic accessibility: Oklahoma and Tennessee will soon host two new amusement parks, serving as a drivable entertainment hub for the surrounding states. As park owners look to build new attractions in 2024, they’re keeping capacity front and center, creating a chain reaction across the tourism industry. With theme parks designed to welcome more guests than ever, the demand for the construction of surrounding hotels and restaurants is also growing.
There’s no denying that inflation has impacted the cost of travel – and at higher price points, today’s tourists have high expectations. Almost every hospitality project currently underway by PCL Construction teams is classified as “luxury.” Our teams are beginning to self-perform more aspects of a project than ever to control quality, schedules, and meet the high standards of excellence set by our clients.
The demand for sports stadiums or renovation projects is growing at a faster rate than even before the pandemic. With the NCAA’s adoption of the name, image and likeness policy that allows student-athletes to profit from their time on a college team, universities are updating their facilities to attract top talent. Incentives from the NFL for franchises to enhance their technology is providing funding for stadium renovations, boosting demand for construction at stadiums across the country.
As teams raise ticket prices to help cover the cost of growing pro-athlete salaries, they’re also looking to construct stadiums with state-of-the-art amenities that justify the price of admission. Over the past year, NFL teams announced billions of dollars worth of investment into new stadiums, often securing hundreds of acres to build anchored entertainment districts around the facility. The goal is to turn a few hours at the stadium into a day-long destination for fans. These complex projects will shape the future of entertainment construction in 2024 and beyond.
The continued, significant investments into our country’s infrastructure and entertainment markets underscores the confidence of the U.S. government and developers in the resiliency of the construction industry. As complex megaprojects become the norm in construction, 2024 will provide immense opportunity for agile contractors skilled in innovation – and will necessitate a larger workforce. The construction industry is not slowing down, making solving the continued labor shortage a top priority for 2024.