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The long-term growth picture for the construction industry in聽Oregon and Southwest Washington is that the pace set since 2021 鈥撀燼 rate of 17 percent 鈥� is likely to continue into 2024 and through the next decade.

That鈥檚 good news, especially since every subset is expected to thrive. The issue, though, is how equipped the industry is to manage the growth given the pressures that continue to squeeze profitability: the chronic labor shortage; inflation-driven costs, not just of labor, materials and supplies, but of money; and the uncertainties and costs of doing business as the impacts of climate change intensify.

Construction firms that focus their management strategies on business continuity and risk management will be in a position of relative strength to weather the times. Here鈥檚 what is important to know.

The squeeze continues

There was a lot of business coming the way of the region鈥檚 contractors in 2023, and that will likely carry over into 2024. The Infrastructure Investment and Jobs Act provided a big boost.聽Oregon is looking at聽$3.4 billion in federal and state funding for road projects and $258 million more for bridges. Washington is in line聽for , including $5.3 billion for road, bridge, transit and climate projects.

Even so, there were challenges. Two-thirds of construction industry respondents to the HUB International 2024 Outlook Executive Survey cited economic challenges and unpredictability as pressures on profitability in 2024.

The impact of inflation and high rates will continue to be felt by the construction industry and wider economy. Volatile pricing for key materials can make it difficult for builders to accurately bid for longer-term projects. Tightening credit combined with the cost of money has caused projects to be stopped or pared back.

Further, high interest rates have had a big impact on mortgage rates and the residential building market. Both Oregon and Washington have struggled with years of underbuilding.聽Oregon needs to build聽some 550,000 units over the next 20 years to keep pace with population trends; Washington needs to build nearly 300,000. One trend continuing to build nationally, given these circumstances, is the pivot away from single-family homes toward 鈥渂uild-to-rent鈥� projects.

A chronic lack of labor

The industry鈥檚 persistent labor shortage continues to be a major drag on construction firms. Hiring and retention strategies have never been more important, as nationally, construction has experienced just聽4 percent unemployment聽and 374,000 job openings.

It鈥檚 become a priority for state policymakers as they look at 2024 budget priorities. Oregon聽Gov. Tina Kotek鈥檚 request for $500 million聽tied to housing needs underscored a common legislative priority. But recognizing that meeting the needs takes resources, her Housing Production Council has pushed for state funding to train construction workers and create incentives for home-building for low- and middle-income families.

Training is only part of the challenge, though. The workplace culture also has a role in the industry鈥檚 ability to recruit and retain workers. That extends to health and safety practices, as well as benefits that speak to individual needs on聽and聽off the job and contribute to quality employee experience.

Worker safety is a top priority among construction firms, yet the industry consistently reports more workplace injuries than any other.聽聽in construction were up 6 percent in 2021 over the prior year. A positive safety reputation has become critical for successful recruitment. An increasingly common practice is for firms to identify and address specific safety concerns before work on a site begins. Others have instituted robust safety training programs.

Another way to improve recruitment and retention is by offering alternative insurance programs and personalized benefits. However, only one-third of the respondents to HUB鈥檚 survey do so. A personalized benefits strategy boosts engagement while also improving overall employee well-being. Even a small start 鈥� by polling workers on benefits they鈥檇 value and introducing relevant solutions over time 鈥� can have a meaningful impact.

Management to preserve resilience

Construction will continue to be under pressure in 2024. Some risks will be more manageable than others, but firms will be well-served by sound strategies for business continuity and risk mitigation. It will also be helpful to understand how the aid of an experienced broker can turn risk and insurance into a valuable strategic tool.

Some trends limiting the industry鈥檚 resilience? 聽globally start with fires and explosions, at 27 percent of the value of industry claims over five years. Natural disasters like hurricanes and recently, intense heat, accounted for about a fifth of claims, followed by defective products (10 percent) and faulty workmanship and maintenance (8 percent).

Concerns related to supply chains are another risk, with continued cost overruns likely in 2024 as inflation keeps material costs high. To guard against delivery bottlenecks, many will continue to secure materials earlier than needed. One HUB client purchased $1 million in HVAC units in advance of a project it was bidding on. The downside: the cost of storing and insuring them until installation.

The industry will continue to feel the impact of such threats in rising rates for some key coverage lines. Builders in high-risk areas can expect general liability rate increases of as much as 15 percent in 2024. Builder鈥檚 risk insurance for large frame projects in catastrophe zones may rise 30 percent higher. But rates will remain flat or decline for workers鈥� compensation, directors & officers (D&O) coverage and environmental coverage.

The use of risk and insurance as a hedge can take several forms. Firms with a well-capitalized captive, for example, might consider taking a loan from the captive to alleviate temporary cash flow issues. And for those that anticipate and address potential issues, their insurance program can be leveraged as a source of contingent capital to bolster their long-term resilience and results.

Plan for 2024

It鈥檚 never too late to have in place a strategy that encompasses insurance, risk management and a vital employee workplace.

It takes an experienced broker to evaluate insurance programs for coverage limits and gaps and ensure risk management resources are provided to support business goals. Numerous benefits options are available 鈥� and ways to evaluate individual workers鈥� needs. The right experts can help ease the challenge of designing a differentiated, personalized benefits program without breaking the bank.

Jeff Cecchini is a licensed agent for global insurance brokerage HUB International. He specializes in contractor insurance programs. Contact him at 971-888-5394 or聽[email protected].

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91视频 guarantees the accuracy or completeness of any information published herein.