2022 State of Residential Construction Industry Report

Published On
Apr 19, 2022

Throughout 2021, the residential construction industry contended with serious supply chain issues and a massive demand surge. Construction companies were forced to adapt quickly to the new market conditions to stay profitable.

A report from the Association of Professional Builders sums up the current state of the industry in the United States, Australia, Canada and New Zealand, and how the last year has likely transformed the construction industry.

According to the report, one of the biggest changes in the industry was the widespread adoption of project management software. In 2021, the number of companies that had adopted these tools increased to 64.8%, from 33.6% the year before.

The report writers believe that the growing administrative burden construction companies are managing contributed to this trend. As construction companies manage more concurrent projects, paper spreadsheets and similar solutions can make effective recordkeeping more challenging. Digital tools and project management software can help streamline much of this work.

At the same time, cutting back on marketing spending may have held some businesses back. Builders spending less than 1% of their revenue on marketing had the lowest margins.

This trend was likely because less marketing means decreased demand for a builder’s services. With lower demand, the builder will have a weaker negotiating position with clients and may have to accept cheaper quotes for new projects. Marketing will therefore continue to be an essential investment for residential construction companies, even as they tighten their overall budgets. Taking advantage of new marketing strategies and tools, especially digital marketing strategies, may also help residential construction companies navigate a changing market.

The report also found that nearly half (49.1%) of all surveyed builders now calculate their fixed job cost per job and per day—a 43.1% increase from 2020. Builders that calculate this figure have a better understanding of how delays and revisions may impact their business’ margins. For businesses that do not already, calculating fixed costs per job and per day could provide significant benefits.

Inflation and volatile market conditions are likely to remain a major challenge for construction companies well into the future. As a result, tools and services that allow businesses to optimize project management and supply chain management may help companies manage these issues. These programs may also help businesses manage other important industry challenges, such as the rising threat that cyberattacks may pose for even small construction companies and their customers.

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