As the construction industry continues to thrive, it also grapples with numerous challenges that have the potential to impact project timelines, budgets, and overall success. The key issues of project delays, labor shortages, supply chains, increased costs, and expanding timelines create challenging claims, and coverage dilemmas that plague the claims process. This article looks at some of the bigger issues affecting the construction industry, and what we can expect going forward into 2025.
The industry still feels the long-term effects from the global health emergency of four years ago. Project delays, funding uncertainties, and supply chain disruptions are extending timelines and complicating backlog management. Moreover, inflation and ongoing supply chain disruptions are causing price fluctuations and material shortages, further squeezing already tight profit margins.
Both private and public projects face material sourcing challenges and financial constraints, leading to potential project abandonment. This trend is likely to persist, and the potential for a recession makes recovery a slow process from the significant negative impacts experienced over the past years.
To mitigate these issues, contractors should thoroughly document delays and secure project financing before contract commitments. Close collaboration with suppliers—to understand lead times and secure materials early—is essential to avoid shortages.
Tech Solutions to Improve Safety and Decrease Claims
Concerns about construction safety continue to grow. From 2011 to 2019, injuries from “falls to a lower level” increased by 42% (falls, slips, or trips increased from 25% of nonfatal injuries to 31% over that time), according to a CPWR analysis of BLS statistics, and the number of nonfatal injuries rose by 8%. Sadly, more than 365 people in the construction industry died from falls, slips, or trips in 2020. Statistics like these are leading to calls for improved safety equipment using tech.
Helmets
Hard hats have been one of the most prevalent pieces of safety equipment at construction sites for the past several decades. However, there is now a “helmet revolution” taking place in the industry. Many of the latest developments in safety helmets focus on reducing impact in order to prevent injuries to the head and neck.
Safety helmets, like the ones worn while rock climbing, are becoming popular for a number of reasons. They have a chin strap and stay on even if the worker falls. They also provide a greater field of vision and a more compact, ergonomic fit for the user.
Wearables
Wearables are another example of tech-enabled safety equipment that is becoming popular on construction sites. Kenzen, a tech company focused on predicting and preventing industrial workforce injuries, has developed a continuous health monitoring program for construction workforces.
Workers wear a small device on their upper arm to monitor core body temperature, heart rate, sweat rate, and activity level. The data feeds into an app that is visible to the worker and manager.
Labor Shortages
Labor Shortages have impacted the construction industry for several years and are an ongoing concern. The construction industry throughout 2024 has dealt with a significant labor shortage, which has become a central challenge shaping the sector’s dynamics. In 2022, it reached “crisis level” according to the CEO of the Home Builders Institute.
This shortage of skilled labor is prompting collaborative efforts among industry stakeholders, educational institutions, and governments to bridge the skills gap. These initiatives focus on promoting vocational training and attracting new talent, emphasizing the crucial role of skilled workers in tandem with advanced technology.
The shortage of workers is impacting project timelines and completion rates. The Home Builders Institute says the lack of construction workers is a main factor in the shortage of housing inventory and affordability. The group’s data shows that nearly 42% of the construction labor force works in residential construction.
Delays in project completion result in more claims. Project owners and developers complain that they lose money or incur additional costs when projects are not completed on time. The problem with these claims is they are unrelated to damage or defects and usually are not a covered claim. These claims are difficult to resolve with little potential for recovery.
Rising Construction Costs
Materials disruptions look to be here to stay, at least for now, amid issues like geopolitical tensions and climate change, and builders are planning accordingly. CBRE’s Construction Cost Index showed a 4.9% increase in 2023 after double-dig- it increases the two years prior (reaching a record high in 2022), as both labor and material expenses continue to rise. Those costs are increasing by 3% to 6% in 2024, according to a report by Currie & Brown, and will likely go even higher into 2025. Combined with rising interest rates, these escalating costs are exerting additional pressure on the industry.
The construction sector also continues to reel from the impacts of global trade disputes, regulatory changes, and supply chain disruptions initially caused by the COVID-19 pandemic. These factors have led to sharp increases in both material costs and wages, placing further strain on the industry. Inflation and rising interest rates add another layer of complexity, high- lighting the need for strategic planning and cost management within the industry.
By leveraging new technologies and innovative materials, construction companies can navigate these financial challenges more effectively, although the initial investment may be substantial. Advancements in technology, such as drones, augmented reality (AR), and building information modeling (BIM), are becoming critical in managing cost challenges. These tools help maintain project volume by enhancing precision and efficiency, ultimately helping to mitigate some of the cost pressures. However, the introduction of innovative materials, while promising long-term savings and sustainability benefits, could initially drive costs even higher.
One of the ways contractors happen to be dealing with this uncertainty is by way of material escalation clauses. It is a matter of how much risk the contractor happens to be taking and how much one can recover if something comes up.
AI Evolving in Construction and Also Creating Unknown Exposure
The rise of artificial intelligence (AI) and advanced technologies is revolutionizing the construction sector. According to Global Market Insights, AI in the construction market value was at over $2.5 billion in 2022 and is anticipated to grow at a compound annual growth rate (CAGR) of 20% from 2024 to 2032.
From autonomous construction equipment to BIM and AR, technology is enhancing project efficiency and accuracy. AI algorithms optimize project scheduling, resource allocation, and risk management, enabling construction companies to make data-driven decisions. Key applications of machine learning (ML) and AI in architecture, engineering, and construction (AEC) include:
- Safety Monitoring. Using AI to detect and predict safety hazards, ensuring a safer work environment.
- Cost Prediction. Analyzing historical data to forecast costs and manage budgets effectively.
- Generative Construction. Improving designs by generating multiple design options based on specific criteria and constraints.
- Risk Identification and Mitigation. Identifying potential risks early and suggesting mitigation strategies to prevent delays and additional costs.
AI and ML are becoming pivotal in addressing the industry’s most pressing challenges, such as labor shortages, delays, and cost overruns. These technologies can handle large volumes of data for problem- solving and pattern recognition through- out all phases of a construction project.
Moreover, according to Deloitte, AI and advanced data analytics could yield cost savings of 10% to 15% on construction projects. These technologies also enhance the design review process and enable more precise estimates, potentially reducing budget and timeline deviations by approximately 10-20% and engineer- ing hours by 10-30%.
The construction industry going into 2025 is not just building structures, it is also constructing them with the precision and efficiency made possible by cutting- edge technology. As AI and ML continue to evolve, their impact on construction will only grow, driving further advancements and efficiencies in the sector.
However, AI happens to be a leading contributor when it comes to cybersecurity exposure. The technology’s full legal risks as well as ramifications are not yet clear due to the fact that AI-related claims have not really entered the legal system yet.
Builders must make sure they are not stumbling into legal peril by way of data mismanagement. Construction software programs happen to have varying con- tracts as well as license agreements, for example. These tools can go on to involve sharing data with third-party owners of that software and also contractors and subcontractors who happen to be accessing that software platform to upload change orders, lien waivers, and other project documents.
The fact is that the more we move toward making use of AI tools, contractors and owners must be thinking about incorporating them into their contracts with some kind of provision that talks about the safety and security of the electronic data that gets shared at all times between project participants.
As we look ahead to 2025, the construction industry is set to undergo transformative changes driven by key construction industry trends such as addressing safety concerns through technology, connected construction sites, and innovative technologies like MI and AI.
Moreover, sustainability remains a core focus, with living materials and eco-friendly practices gaining traction. Embracing these construction industry trends will be crucial for staying competitive in the evolving construction landscape.
Additionally, the rise of construction technology trends, including software like Digital Asset Management (DAM), is streamlining project workflows and enhancing collaboration by efficiently managing and sharing digital assets. This saves time and money while helping to win more business.