Rising costs and labor shortages disrupt construction industry

The shortage of manpower is a major challenge for respondents and is a significant contributor to rising costs: nearly two-thirds of construction companies have also had to increase their employees’ salaries. In addition, over 86% of French companies are experiencing project delays due to staff shortages – this figure stands at 75% on average worldwide – which is weighing heavily on their profitability. According to 65% of respondents, investment in new technologies would improve profitability through greater efficiency. However, while this potential is recognized, the adoption of these tools remains slow.

The results of PlanRadar’s new study, Global Housebuilders’ Survey 2024, provide a comprehensive snapshot of how the global housebuilder industry is feeling. A total of 2024 companies across 669 countries participated in the study, providing valuable insights into the current challenges facing the industry and their outlook for the future.

The findings of this survey reflect a difficult situation for the housing construction sector. Despite a macroeconomic context of declining residential construction production (-19,8% in France between April 2023 and March 2024 compared to the period April 2022-March 2023[1]), demand remains dynamic worldwide, with nearly 75% of respondents stating that it has increased or remained stable over the past year. It should be noted that only 12% of housing builders reported temporarily reducing their activities, which demonstrates the resilience of the sector despite the difficulties.

In this context, respondents to the study identified three major obstacles to the development of the sector: labor shortages, uncertainty about government policies, and finally financial constraints. To address these problems, companies propose action on several fronts: reducing regulatory barriers imposed on the housing sector, revising immigration policies to attract skilled workers, and finally more effective financial incentives to stimulate the market. In France, local stakeholders have similar concerns, with a marked concern about the lack of construction projects for almost half of professionals.

Regarding the labor shortage in particular, it is considered "unprecedented" in France, according to McKinsey & Company, with a fivefold increase in job vacancies between the third quarter of 3 and 2023[2016]. The consulting firm encourages companies to modernize their processes, particularly through digital technology but also through management.

For Álvaro Vega - Regional Manager France, Spain, Italy and Latin America at PlanRadar: “Construction industry stakeholders have many concerns, from labor shortages to political uncertainties. Despite this, our study shows encouraging data. For 45% of professionals, increased investment in technology solutions – such as construction management software and BIM – is the key to improving profitability and productivity. A sign of hope for the sector!”

Indeed, in an industry that is constantly adapting to meet demand, the survey reveals that 50% of companies are actively seeking growth opportunities to cope with challenging market conditions. However, despite this finding, more than 25% of companies are still not using construction management software, such as PlanRadar. This gap between the perception of the benefits of technological tools and the actual investment in these platforms as well as the skills, represents a major obstacle that could hold back the industry.

For Sander van de Rijdt, Co-founder and CEO of PlanRadar: “Rising costs and labor shortages are shaking the very foundations of the residential construction industry as global demand for housing reaches critical levels. The study highlights these challenges, but also reveals some optimism. With most builders convinced that technology solutions can improve productivity and profitability, the path is clear, provided the industry can bridge the adoption gap. In a time of high interest rates and falling demand, companies now have a unique opportunity to pause and focus on optimizing their internal processes. This preparation is crucial as interest rates begin to fall, spurred by recent ECB and FED cuts, which are already signaling a recovery in demand.”

For more detailed information, the full report is available here.

*PlanRadar Annual Customer Survey (2023)

[1] Ministry of Ecological Transition and Territorial Cohesion, “Real Estate Situation” July 2024

[2] Construction sector: the imperative of excellence to support the environmental transition | McKinsey

Illustrative image of the article via Depositphotos.com.