Outlook 2022

A number of the nation’s largest construction projects are set to start construction, hit major development milestones or otherwise spark interest in 2022. 

Priced from the hundreds of millions to the tens of billions, these developments-in-progress are notable for their size, impact and surrounding narratives. Some are highly divisive, some are tied to famous names or companies and others are groundbreaking innovations in manufacturing or transportation. Many are a combination of all of the above.

Below are just a few of the projects Construction Dive is planning to keep an eye on in the year ahead: 

Samsung Chip Factory

Austin, Texas
Cost: $17 billion

In late November, tech giant Samsung announced that it plans to construct a $17 billion semiconductor fabrication facility in Taylor, Texas, located northeast of Austin, Texas. Samsung intends to start building the factory in 2022, with operations slated to begin in 2024. The company has not yet announced a lead contractor for the project.

The facility’s estimated cost will cover its buildings, property improvements, machinery and equipment, according to Samsung’s announcement. It will be the South Korean firm’s largest investment in the U.S. The company has operated a chip manufacturing facility in Austin since the late 1990s, pictured above, and intends to share infrastructure and resources between the two sites.

The project announcement comes amidst a global shortage of computer chips driven by supply issues related to COVID-19. Samsung is one of many chip manufacturers attempting to geographically diversify its manufacturing operations, according to the AP, and a series of federal funding and tax incentives for semiconductor manufacturing, including the $52 billion CHIPS Act, could spur more investment in chip manufacturing in the U.S. if passed.

California High-Speed Rail

Central Valley Phase
Cost: $13.1 billion

The California high-speed rail project, which would be the nation’s first long-distance high-speed rail line once complete, currently encompasses 35 active construction sites across a 119-mile stretch of the Central Valley. The sites are divided across three design-build contracts:

• Construction Package 1, covering 32 miles of construction, led by Tutor-Perini/Zachry/Parsons
• Construction Package 2-3, covering 65 miles of construction, led by Dragados/Flatiron
• Construction Package 4, covering 22 miles of construction, led by California Rail Builders, a joint venture of Ferrovial-Agroman West, LLC and Griffith Company.

According to the State of California’s High-Speed Rail Authority, the system is expected to run from San Francisco to Los Angeles in under three hours via bullet trains moving up to 200 miles per hour. Planned extensions to Sacramento and San Diego would extend the system’s reach over 800 miles with up to 24 stations.

The California High-Speed Rail Authority anticipates environmental clearance for the full Phase 1 San Francisco to LA/Anaheim light rail system by 2023. The current cost estimate for the Central Valley section is $13.1 billion. The first section will run between Merced, California, and Bakersfield, California, with operation expected to begin by December 2028, according to the rail authority’s 2020 business plan. Operation between San Francisco and LA is expected to begin by December 2033.

Amazon HQ2

Arlington/Crystal City, Virginia
Cost: More than $2.5 billion

Construction of the first phase of new Amazon HQ2 office space at National Landing, started in January 2020, is on track to finish by 2023, according to Clark Construction. The contractor expects to top out the office buildings at Metropolitan Park in early 2022, complete facade installation by the summer, and move to develop the 2-acre landscaped courtyard once the buildings are complete. 

The Metropolitan Park campus will provide 2.1 million square feet of office space for the online mega-retailer across two 22-story LEED-certified buildings, as well as 50,000 square feet of retail space, to be leased to local small businesses.

Plans for the second phase of construction, PenPlace, face a series of public hearings before Arlington County’s Planning Commission and County Board through the end of 2021 and into 2022. Whiting-Turner is the lead contractor for the second phase, and Amazon anticipates that PenPlace’s first buildings will be complete by 2025. 

Buffalo Bills Stadium

Buffalo, New York
Cost: Up to $2.1 billion

In August, ahead of the expiration of its lease to play home games at Highmark Stadium in Orchard Park, New York, the NFL’s Buffalo Bills submitted a plan to the City of Buffalo for a new, $1.4 billion, 60,000-seat stadium to be built by 2027, according to the AP.

Possible locations for the new stadium include Bills’ current site, directly replacing the Highmark Stadium, or a new site in downtown Buffalo, yet to be determined. If constructed at the Bills’ current site, the new stadium would be the 11th most expensive ever built. In downtown Buffalo, it would be the third-most expensive at $2.1 billion. In addition, there would be the cost of relocating residents and businesses. 

Last month, engineering firm AECOM completed its preliminary survey of the project and its impact. The company recommended building a new stadium instead of attempting to renovate the 50-year-old Highmark Stadium, owing to the high estimated cost and shorter life span of a renovation. The AECOM report also recommends building in Orchard Park instead of building new in Buffalo. 

On Dec. 20, New York Gov. Kathy Hochul stated that she is “confident” that the Bills could reach a deal with the state of New York related to public funding for the stadium’s construction, according to the AP. 

Sanborn Solar facility and battery storage

Mojave, California
Cost: $1.15 billion

Mortenson and renewable energy developer Terra-Gen broke ground on the Edwards & Sanborn Solar Facility and Battery Storage earlier this year, and expect to complete the project by the end of 2022. The project - located on a combination of private land and a site leased from Edwards Air Force Base - is expected to cost about $1.15 billion, according to Dodge Data & Analytics.

The project is coming online in phases, and a portion of its solar arrays are already in operation, according to Terra-Gen. Once complete, the facility will feature a 1,118-MW solar complex with 2,165 MWh of energy storage capacity - the largest single solar and storage project to reach this stage of development, according to Solar Power World. Energy production is expected to utilize more than 2.5 million solar modules, with over 110,000 lithium-ion battery modules for storage.

The energy generated by the Edwards & Sanborn facility is expected to power more than 158,000 homes and displace more than 307,000 tons of carbon dioxide on an annual basis. First Solar will supply the site’s solar modules, and LG Chem and Samsung will supply the batteries. 

U.S./Mexico border wall

Texas
Funding: More than $1 billion

Most federal border wall construction was halted on President Biden’s first day in office. The U.S. Army Corps of Engineers is in the process of canceling all federal contracts related to the wall, and the Department of Homeland Security has begun a series of maintenance and emergency repair projects on its existing portions.

However, Texas Gov. Greg Abbott (pictured above in wheelchair) has spearheaded a state-level effort over the past six months to resume the construction of a barrier along the state’s border with Mexico. 

The Texas Facilities Commission has chosen a joint venture between Dallas engineering firm Huitt-Zollars and Pittsburgh-based engineering firm Michael Baker International as the project manager for the border wall and associated infrastructure. In November, the TFC awarded Posillico Civil Inc. with a design-build contract for a portion of the border’s infrastructure, including wall construction.

Construction is underway as of Dec. 18, with 880 feet of barrier wall installed in Starr County, Texas. The project’s funding totals more than $1 billion, according to an estimate by the Texas Tribune, and includes $54 million generated through a state-led crowdfunding campaign, the vast majority of which (98%) comes from a single donor, Timothy Mellon, chairman of Pan Am Systems.

Enbridge Line 5 - Great Lakes Tunnel

Michigan
Cost: $500 million

In 2018, former Michigan Gov. Rick Perry approved Canadian oil supplier Enbridge’s Great Lakes Tunnel project, which would replace the existing Straits of Mackinac section of the Enbridge Line 5 oil pipeline with new lines buried under the Straits. Enbridge intends to bore as deep as 100 feet below the lakebed in order to install the new pipeline at a projected cost of $500 million. 

The Great Lakes Tunnel has been reviewed and approved by the Michigan Department of Environment, Great Lakes and Energy, and is currently under review by the Michigan Public Service Commission and the Army Corps of Engineers. 

In the interim, the fate of Enbridge Line 5 in its current form remains in a legal tug-of-war between Enbridge and authorities in Michigan. 

Environmental activists and local tribal authorities oppose the pipeline’s continued operation, and current Michigan Gov. Gretchen Whitmer had campaigned on the promise to shut down the underwater section, which dates back to 1953 and runs directly through the Straits of Mackinac. Gov. Whitmer revoked the easement permitting its operation in November 2020.

While Enbridge states that Line 5 has operated “without incident” at the Straits of Mackinac for more than 65 years, Gov. Whitmer has gone on record to say that Line 5, in its current form, presents “an unacceptable risk of a catastrophic oil spill in the Great Lakes that could devastate our economy and way of life.”

Hyperloop projects

Nationwide
Cost: TBD

The Infrastructure Investment and Jobs Act, signed by President Biden in November, introduced a regulatory framework under which hyperloop projects can compete for federal funding for U.S.-based projects. 

The Hyperloop concept, popularized by Elon Musk, incorporates a series of vacuum-sealed tubes that can transport passengers and cargo in low-pressure pods at proposed speeds of over 700 miles per hour. Hyperloop projects and test sites are in various stages of progress around the world.

“Hyperloop’s inclusion shows that we’re on the precipice of a new era that will change the way we think about mobility in this country,” Josh Giegel, CEO and Co-Founder of Virgin Hyperloop, said in a press release following the legislation’s passage in the Senate in August.

In West Virginia, development is underway on the Virgin Hyperloop Certification Center. First announced in October 2020, the 800-acre site will include testing facilities, training centers and a certification track for hyperloop technology. Virgin Hyperloop intends to achieve safety certifications by 2025 and begin commercial operations by 2030. 

Virgin Hyperloop has an active test track in Las Vegas, and is targeting the Midwest, Missouri, North Carolina, and Texas for potential future hyperloop routes in the US. California-based HyperloopTT has conducted a feasibility study for a hyperloop route in the Great Lakes region, and Swiss-American hyperloop company Swisspod has announced the construction of a test track in Colorado.

For construction, a "Help Wanted" sign is familiar, as the demand for new workers has continued to outpace the supply.

The industry has faced a compounding labor shortage for decades, and, in 2022, a perfect storm of swirling factors could both aid and exacerbate the issue.

For most of 2021, jobs were stagnant in construction, according to numbers from the Bureau of Labor Statistics. Construction began the year with roughly 7.4 million jobs, seasonally adjusted, and the last report of the year indicated 7.5 million jobs in November. That’s the closest construction's employment numbers have been to prepandemic numbers since March 2020, when the industry employed 7.6 million workers.

From a huge influx in public spending, to debates over vaccines and continued social changes, here are the top trends impacting construction labor in 2022.

Recruitment takes on new importance

In the past few years, companies nationwide have seen rapid cultural changes, with an emphasis on creating opportunities for underrepresented groups, such as women and minorities. Construction has gotten in on that trend, with programs and incentives aimed at attracting new workers to the industry, regardless of their gender or cultural background.

That may not always be the impression those outside the industry see, however.

"The days of the rough and gruff contractor, that ship has sailed," said Tim Keating, president of R.C. Stevens Construction in Winter Garden, Florida. "I'm an old guy. But I changed my way, and I'm the head cheerleader."

Keating said he has tried to make cultural shifts within his company, emphasizing that in order to make workers feel welcome and valued — which is key to retaining them — employers must "walk the talk," meaning engaging with workers and generating a welcoming culture at the jobsite.

For Stephanie Schmidt, president of Poole Anderson Construction in State College, Pennsylvania, retaining the workers she has is her biggest goal for 2022. She has already raised pay rates and looked into new benefit packages and paid time off. But, at the end of the day, it's always about attitude and culture.

"Somebody will always pay a buck more to get somebody," Schmidt said, "but we really need to get them ingrained in our culture by providing them with good work, steady work and knowing that they have a future."

Developing a career development plan for every worker they take on has allowed Poole Anderson to provide them with a clear career path for the future, while focusing on attitude and ability.

Keating said it is always about attitude, as it's possible to teach anyone you can recruit how to build. The real value comes from the soft skills — which 92% of talent experts say is vital to retention. 

Even still, more will need to be done to attract women and minorities, Ken Simonson, chief economist for Associated General Contractors told Construction Dive. 

"I think it's going to be essential for construction firms to continue to broaden those [cultural recruitment] efforts," he said.

With slow population growth, the industry won't be able to count on the same pool of workers, Simonson said, which means firms will need to reach out to even more women and minorities. 

Construction also faces an uphill battle with location, as often the jobsite may be far from home. Distance may cause workers to sit on the sideline, or find more stable work — even if it pays less — closer to home.

Carla Kugler, president and CEO of ABC New Mexico, says their members are doing more to support workers' families, especially for those with jobsites that keep them away for extended periods of time. From ensuring workers can return home, providing child care and creating family day — where relatives of workers can visit — on jobsites, Kugler said, the industry recognizes the daily sacrifice workers make.

Infrastructure work will impact private jobs

President Joe Biden signed the Infrastructure Investment and Jobs Act into law in November, spurring a once-in-a-generation influx of $1.2 trillion in new spending — $550 billion of which was earmarked for infrastructure itself.

The funds mean more work for civil contractors, which builders and groups have pushed for for years. But the new work will not come without its challenges.

The industry, which was already in dire need of workers, will now see an increase in demand for jobs across more work sites. As a result, wages are likely to increase for skilled workers who will have more options, and the demand-supply ratio could worsen.

The issue will not just make things harder for civil builders, however. As some workers move to where the money is, private contractors may see more challenges in staffing jobsites. Those challenges could lead to entire projects being put on hold, or even not taking off.

"I'm concerned that the private developer or the private person that wants something built will say, 'I can't get people, there's no reason for me to build it now,' and that's going to kind of put a stranglehold on that faucet," Keating said.

As long as public projects are taking off, private projects will take a backseat, Keating said. The wages will simply be higher for those public projects, and therefore private work will be "squeezed."

Despite new challenges the IIJA will no doubt impose, Simonson said the influx of work will certainly be a net positive, and improve the quality of life in the U.S. 

"It's a huge positive for construction both in a steady extreme of projects and signaling to those people that this is a field that we see a lot of money coming for a long time," Simonson said.

The increase in public work could also help the industry continue to improve employment practices. By having a light pipeline of workers entering the workforce now, contractors face a challenge, but one that will present them with the opportunity to identify what employees want, Todd Lofgren, executive vice president and general manager for Skanska USA said in an email to Construction Dive. 

The demand for workers could help with the social push to improve those conditions for workers.

With more public work, however, the industry may continue to see a duel over COVID-19 vaccinations.

Vaccine mandates will continue to cause confusion, conflict

"It has become almost impossible for contractors to navigate the quagmire of regulations governing COVID-19 and vaccines," Trent Cotney, CEO of Cotney Attorneys and Consultants, told Construction Dive in early December. "The uncertainty has left many contractors to do little or nothing in the form of preparation because it is unclear what current regulations will remain after judicial scrutiny."

Between the time of Cotney's statement and the time of publication, uncertainty has continued around mandates. The most recent change came on Dec. 22 when the Supreme Court said it would hear arguments on the two mandate measures; a vaccine-or-testing mandate for employers with more than 100 workers and a vaccination requirement for certain health care workers. Cases will be presented to the Court on Jan. 7. 

Kugler said her members were "freaking out" over the mandates, finding the guidance unclear, and the responsibility a daunting undertaking to document 100% of workers vaccination status. As the responsible contractor on a public project, many GCs would also need to ensure the vaccination status of all the subcontractors on a jobsite, which could lead to a possible default.

Defaulting, Kugler said, severely limits a contractor's chances of ever winning a public work contract again.

In addition, construction managers find themself between a rock and a hard place as they try to facilitate the discussion between their workers who want an inoculated workforce and those opposed to vaccines. Construction's vaccine rate is low, as less than 60% of workers are vaccinated, compared to more than 80% across other publications, according to Silver Spring, Maryland-based CPWR, the Center for Construction Research and Training, a construction safety research group.

Simonson said he is hopeful that more workers would realize it is within their own self-interest to get vaccinated, for protecting themselves and their fellow workers. 

Mandates or no, contractors and groups are trying to encourage workers to take the vaccines. Jay Reed, president of ABC Alabama, told Construction Dive he's spoken to vaccinated business owners who have encouraged getting the shot, but don'y want it forced on their employees.

Nevertheless, Lofgren said, some workers and employers will have to face the fact that private clients will impose their own restrictions, which could mean less or no work for those that don't get the shots. That's something Skanska USA is already experiencing.

"Based on mandates from clients, contractors can expect to have vaccinated employees," Lofgren said. "We are seeing more private clients enacting vaccination mandates, not only in healthcare and life sciences sectors, but in other markets as well."

Meanwhile, the AGC has appealed to members to get the shots by filming public service announcements featuring workers who've gotten sick and recovered.

At the end of the day, the goal for employers and workers seems to be the same, Reed said: keeping work going.

"The show must go on. Shutting down is not going on," he said

In late December, Deron Brown was having trouble finding a hotel room in Phoenix for a January conference. And from his perspective, that was a good thing.

As president and chief operating officer of U.S. operations for Edmonton, Canada-based PCL Construction, Brown constantly tries to read the tea leaves of where construction markets are headed.

As 2021 turned into 2022, many of those signs indicated it was at least in the right direction.

Beyond the lack of hotel rooms in Phoenix — a signpost for Brown that "people are getting back out there and doing things" — he's noticed a distinct change in the tenor of PCL's clients across its buildings, industrial and civil divisions. Namely, they're no longer lollygagging when it comes to committing to projects.

"The key is whether people are actually pulling the trigger and signing contracts," said Brown. "Over just the last couple months, we see people doing that." For example, while hospitality construction has been one of the hardest hit sectors of the pandemic, PCL had at least six hotels in various stages of development and construction at the beginning of 2022.

"We have a lot of developers and hoteliers who are wanting to build," Brown said. "Their estimating and pre-con departments are very busy."

Indeed, across the four regions where PCL operates — Canada, Australia, the Caribbean and the U.S. — the firm had a record backlog at the end of 2021. For Brown, it all adds up to a robust outlook for the year ahead.

"We do see a strong construction market for 2022," said Brown. "Some areas are still hurting, but a lot of other areas are very strong."

Brown and PCL aren't alone in that tentative, but rebounding, new year's forecast.

Nervous optimism on pricing

Construction pros and economists are taking a cautious but more hopeful view on the year ahead, even in the face of the highest rate of inflation since 1982, material price surges, continuing supply chain snarls and the exploding COVID-19 omicron variant.

While these market observers still see plenty of challenges ahead in the sector — the endemic labor shortage being top among their concerns — their perspective at the beginning of the year marks a return, if not to normal, at least a resemblance to the pre-pandemic world.

"Looking at 2022, I would say I'm nervously optimistic," said Ken Simonson, chief economist for the Associated General Contractors of America. "Nonresidential construction, by and large, seems to have passed the low point and is on an upswing."

For Simonson, that nervous optimism is based, at least in part, on some commodity prices coming back down at the end of 2021.

He pointed to copper's 10% dip in December – though it started to blip up again in January – and hot-rolled coiled steel giving back 20% since its peak in September. Lead times for deliveries of materials were also shrinking, he said, a factor that should put further downward pressure on prices.

"I've gotten more optimistic about material prices," Simonson said. While he doesn't expect them to return to pre-pandemic levels, he anticipates more up and down volatility, which is better than the exclusively upward cost trajectory many material prices took through to the summer of 2021. 

His bigger concern is continued threats from COVID-19, including omicron, the ever-changing vaccine mandate landscape and heightened vaccine hesitancy among construction workers, compared to other industries.

"It means there is a much greater risk for severe illness from COVID, and depending on what mandates are in effect, it adds to the difficulty construction firms will have fielding a full, healthy and eligible workforce," Simonson said.  

Those challenges add to the already endemic labor shortage in construction, where there were 345,000 unfilled jobs at the end of November. That was actually down from October, when openings hit an all-time high of 455,000, but up from 261,000 a year earlier, a 32% jump, according to the Bureau of Labor Statistics.

The benefits of inflation

Yet, as some of construction's biggest challenges converged in 2021 — namely rising prices and fewer workers — there's also reason to believe that they might conspire to contractors' benefit in the year ahead.

That's the view of Anirban Basu, chief economist at Associated Builders and Contractors, when he looks at surging inflation in the economy as a whole — it rose 6.8% year-over-year through November 2021 — and the number of workers who are still sitting on the sidelines.

"Inflation is real. It's not particularly transitory," said Basu, countering the Federal Reserve's view for much of last year that rising prices were temporary, before it pivoted to a more hawkish stance in December and signaled it would start increasing interest rates in 2022. "More and more people will have difficulty paying their bills."

The silver lining of those increases is that they may very well force people to go back to their jobs. "That might induce them back into the labor market, which I think would be a positive," Basu said. "It's time to get back to work." 

Another looming advantage of rising prices is that it has put pressure on developers to lock in contracts now, before costs can go higher, and get their projects in the pipeline while contractors still have bandwidth. That's a factor that Brown sees incentivizing his clients to move forward as well, especially as the pandemic recedes.

"There's some confidence that we don't have this thing beat yet, but we're moving in the right direction," Brown said in reference to COVID-19. "And to build a project, you don't build it in a day — you build it in a year and a half, or two years. So people are starting to think that if they wait, they may miss the right opportunity to build their project."

Manufacturing's long journey home

For Richard Branch, chief economist at Dodge Data & Analytics, labor also figures into the biggest challenges facing construction in 2022, a trifecta he calls the "3 Ps" of "people, prices and productivity," with the last hurdle referring to trying to do more work with fewer resources.  

But he also sees evidence that construction might enjoy some tailwinds due to adjustments firms have made due to the very challenges COVID-19 has thrown at the country.

A case in point is manufacturing, where a movement toward "onshoring" to overcome far-flung supply chain tangles overseas has led producers of goods not only to start ramping up their existing production volumes, but also to build new facilities to pump out more product.

Indeed, it was the manufacturing sector — not warehouses, not healthcare, not other nonresidential buildings — that blew the doors off construction starts in 2021, increasing by 86%, according to Dodge's data.

"The good news is we are starting to see factory output come back to close to where it was prior to the pandemic," Branch said. "That should help the supply side, and if we start to see some improvements with the log jams at ports, perhaps by the back side of 2022, we might see some reprieve from these higher prices."

More hoarding ahead?

Until that comes, however, there's another outlier that concerns construction watchers, and that's an increase in stockpiling of materials in yards and warehouses by contractors, simply to have them, should a job materialize where they can be used.

It's a trend Brown has picked up on as he goes out to compete for the increased amount of contracts he's seeing in the marketplace.

"Remember when the pandemic hit and everybody stockpiled toilet paper? That's happening today with businesses and materials," Brown said. "People are stockpiling three months of piping, or whatever it may be."

That has compounded the problem of availability and delayed deliveries.

"Some of it is a shortage, and some of it is shipping, but some of it is still a little bit of fear, where people are buying products to try to protect themselves," Brown said. "That's driving up the demand, which does not help the overall industry."

Craig Tappel, chief sales officer in the construction practice for Chicago-based surety brokerage Hub International, said he's seen that among his clients as well.

"They're trying to build stockpiles so that they have their own supplies, and that's adding to the shortages," Tappel said.

It also introduces another element of risk that contractors need to be aware of.

"If it's not assigned to a particular jobsite, and it's not part of materials headed toward a particular project, it's not automatically covered under that builder's risk policy," Tappel said. "So you've got to think about that. What are you doing to mitigate that risk?"

It's a question contractors will need to answer as they as they navigate the tenuous recovery expected for 2022.

While the COVID-19 pandemic has hammered many areas of commercial real estate, the multifamily sector has emerged as a clear winner. 

Although apartment rents plummeted in the early months of the pandemic, they quickly recovered in early 2021. These rent increases set the stage for an equally robust sales market that drove up the prices of apartment communities. Rent and valuation growth, taken together, create fertile ground for development. 

But just because apartments are making money doesn't mean the year ahead will be easy. Industry executives, particularly on the development side, see a number of challenges and opportunities in the new year. Here, Construction Dive looks at the most important factors for the multifamily sector in 2022.

Rent increases should moderate

The apartment industry's COVID-19 slump didn't last long. In the first quarter of 2021, demand doubled the usual 25,000 units normally seen during that time of the year. By the summer, the apartment industry was seeing record-high rent increases.

However, Joe Lubeck, CEO of Florida-based apartment owner and manager American Landmark Apartments, doesn't think these double-digit increases are sustainable into 2022, particularly with inflation.

"People are paying more for food, and more for gas and everything else," he said.

Jay Parsons, vice president and deputy chief economist at RealPage, agrees that rent growth may moderate this year.

"We're forecasting national growth in the high single digits," Parsons said. "Those are still big numbers by comparison of most years, but we probably won't be touching the 16% or 17% range we saw [in 2021]."

In some metros, another factor limiting growth could be rent control legislation. Measures capping increases emerged in a number of markets around the country. For example, in November, Minneapolis voters gave the city council the ability to put rent controls in place, while St. Paul residents passed a ballot measure to cap most rent increases at 3% annually.

Apartment industry trade groups say rent control legislation is on their radar in many other places, including Colorado, Nevada, Illinois, Washington, Massachusetts, Washington, Pennsylvania and even red states, like Kentucky and Florida. 

"I think that what has traditionally been a coastal issue in New York, San Francisco and New Jersey has now entered the Midwestern space," said Greg Brown, senior vice president of government affairs for the Arlington, Va.-based trade group the National Apartment Association. "And that is cause for concern for us."

Values will rise

As rents continued to rise, the value of apartment properties also soared in 2021, increasing 16.8% from Oct. 2020 to Oct. 2021, according to New York-based research firm Real Capital Analytics (RCA) CCPI, which gauges the value of commercial real estate. 

Even if rent increases are moderate in 2022, intense competition for apartments should continue to push prices up.

Right now, the number of investors in the market far outpaces the number of properties for sale.

"We see a demand for assets that outpaces the availability to buy them," said Charles Foschini, a senior managing director at New York-based apartment lender Berkadia's Mortgage Banking team.

However, that demand is squeezing some buyers. After purchasing 14 properties in the first eight months of 2021, Doug Root, co-founder and managing director of Arlington, Virginia-based apartment owner Blackfin, was only able to close one deal in the last quarter of 2021. 

Some of the investment groups winning deals are relatively new entrants to the space.

"I think every day it seems like there's more private capital and syndicators and crowdfunders out there," said Matt Ferrari, co-chief investment officer and head of acquisitions and east coast asset management for California-based TruAmerica Multifamily, an active buyer in 2021.

While more investors are entering the space, there still aren't enough properties being built to meet their appetite. That lack of supply, coupled with increasing demand, is pushing prices upward.

"You have zoning restrictions limiting the amount of apartments [being built]," said Jim Costello, senior vice president for New York-based commercial real estate data firm Real Capital Analytics (RCA).

Apartment buildings will continue to sell

As rents boomed, so did apartment sales. The significant rent increases drew investors into the multifamily business from other real estate sectors and around the globe in 2020. 

"Real estate is getting a lot of play," said Bobby Lee, CEO of Los Angeles-based apartment owner and manager JRK Property Holdings, which acquired 12 properties and sold two from January 2021 to early 2022. "And there are really only two safe places in real estate right now — industrial and multifamily. So, I think there is going to be a lot more capital coming into this space."

The popularity of apartments as an investment class showed up in the numbers. Before the end of November, $201.3 billion worth of apartments were sold nationally in 2021, according to RCA. By comparison, the industry's previous all-time high in transactions was $193 billion, posted in 2019. 

Root predicts some buyers might pull back at the beginning of the year.

"It [the apartment sales market] had been on a tear," Costello said. "It struggled early in the pandemic, but it closed 2020 with a record high December deal volume. It was on fire, and in 2021, it has been off to the races."

"I think deal flow will be very light in the first quarter because it felt like the whole market was for sale at the tail end of this year," Root said. "If you were a seller, and certainly a private seller, there was a lot of appetite out there, and it made a lot of sense to take your deal to the market."

Others expect the flood of money chasing apartments and willing sellers to continue to power transactions in the year ahead.

"I just feel like 2022 is going to be even bigger than 2021," Lee said. "And I think 2023 could be sequentially another good year. You could have two more good years because you're going to have willing sellers."

Despite obstacles, developers will build apartments

With strong performance from both rents and sales, developers are eager to build more apartments. And debt and equity are lining up to get behind these deals.

"We've got so much equity chasing us right this minute," says Steve Hallsey, executive vice president of operations for Atlanta-based Wood Residential Service, the management arm of large developer Wood Partners. "We're just really trying to be very selective."

Permits, which are a good barometer of future production, continue to rise. In November, 560,000 multifamily units were permitted, a 6.1% increase from October and a 15% jump compared to the same period in 2020, according to RealPage.

In November, 560,000 multifamily units were permitted, according to the U.S. Census Bureau. This was an increase of 6.1% from October and a 15% jump from last year. Meanwhile, 491,000 multifamily units were started for the same period, up 12.1% from the (downwardly revised) October annual rate, and a 39.1% increase from November 2020.

Still, getting projects started to meet the demand continues to be a challenge. Adam David Lynd, president and CEO for Shavano Park, Texas-based apartment developer, manager and owner of The Lynd Co., has seen prices for multiple products dramatically increase over the last couple of years.

"Costs are through the roof — everything from flooring to roofing to shingles to glass," Lynd said. "The supply chain shortage is really hurting everybody."

Construction challenges will continue

If that's not enough, labor prices have also risen in the past year.

"The labor availability situation seems to be getting worse," said Ken Simonson, chief economist for The Associated General Contractors of America. "While demand for apartments looks like it's holding up very well, it's going to be very challenging to produce them and bring them in on time and budget."

Land also continues to be a challenge. In fact, it's an issue for all types of residential rental properties, according to Joe Morrison, president of Myrtle Beach, South Carolina-based Sands Cos., a construction company and developer that builds apartment-style cottages in the Southeast.

"It's very competitive," Morrison said. "It's like you're getting interviewed by the sellers now… They're doing background checks of who you are and what you've done to make sure you can perform and build a product that you say you're going to build."

Legislation could help

While the industry is prepared to combat rent control, it welcomes some other government action. A few local, state and federal governments enter 2022 looking at ways to make apartment building easier. With shortages of housing and rising costs, some local governments are looking at more supply as an answer. To achieve that goal, they're making the process of building easier.

For instance, Minneapolis has removed single-family zoning to allow for more dense housing. Other localities, like Mongomery County, Maryland, are considering making it easier to add density in single-family communities.

"In California, they're trying to do much more of a carrot-and-stick approach," said Jim Lapides, a vice president at Washington, D.C.-based trade group the National Multifamily Housing Council. "They're actually trying to use a stick this time to encourage more housing development. So, I think we're seeing more of that around the country."

On the national level, the bipartisan Yes In My Backyard (YIMBY) Act has the potential to stimulate more development by encouraging localities to cut regulations. 

"I think what's most heartening is that so much of the conversation has changed around this issue of affordability and that people realize we need to add more supply," Lapides said.

The construction industry had a challenging but positive year in 2021, and the growth of construction technology has been one of the bright spots. With the pandemic forcing faster adoption of technological tools, experts and investors are recognizing the sector's increasing importance. The federal government is also providing an assist, with $100 million designated for contech in the recently signed infrastructure act.

"[Construction technology] is not a 'want' anymore. It's a 'need,'" said Matt Abeles, vice president of construction technology and innovation at Associated Builders and Contractors.

So what can contractors expect in the construction technology space in the coming year? Here are five trends that construction pros should be keeping an eye on in 2022.

A focus on good data

The experts who spoke to Construction Dive all agreed — gathering data is one thing, but the way contractors actually utilize and share it across their companies is what will affect their success.

"I've always said data is only as good as the action you can take with it," Meirav Oren, the co-founder and CEO of construction technology firm Versatile, told Construction Dive. "Anything that has to do with machine learning or AI starts with the ability to have data that allows you to teach the machine."

A big part of the problem is "bad" data, or information that is in some way inaccurate or misleading. According to an Autodesk report from the fall, bad data cost contractors globally $1.8 trillion in losses in 2020. The study also revealed that bad data was responsible for 14% of avoidable rework, which amounts to $88 billion in costs.

"I'll say, at this point, insurers should start paying attention to and rethink the risk models, as well as how they assess and reward GCs that employ technologies the right way," Oren said.

Dan McCarthy, the CEO of Dodge Construction Network, is also a big advocate for employing data on the jobsite. McCarthy said that construction projects are like mini supply chains that need to get materials from one place to another — and heavily rely on accurate data to do so.

"Increasingly, what you need is data, the valuable data to be able to move around the supply chain in such a way that helps benefit all the participants, helps them make more money and helps reduce the risk in any project," McCarthy said.

Digital visualization

At the top of Oren's list of future trends is the ability for contractors to visualize their projects and data, and use that information to get ahead and improve their work.

"The ability to see in a very visual industry probably comes first," Oren said.

Contractors are speeding along work with technology like Building Information Modeling (BIM) and robots that allow them to get visual data without spending extensive amounts of time collecting it. For example, general contractor Hensel Phelps used time-saving and precise drones to help construct the Kalahari Resort in Round Rock, Texas.

"As you're covering a really massive area, like 350 acres, that would take an enormous amount of time, if you were trying to cover the whole thing in that type of grid," said John Frost, the vice president of business development at Propeller, a construction technology firm that worked on the Kalahari Resort project. "But with a drone, you can, in an hour, achieve a much greater level of coverage, because you don't get a point every 25 feet, you get points every centimeter or two or every couple inches."

Oren believes that better visualizations and robotics won't take jobs from workers, but will instead enable them to do their work better.

"I'm a huge fan of industrial robotics on the layout side, when it comes to getting those smart people off their hands and knees and utilizing those incredible skills in other domains, while the robot does what they should no longer be doing, and these people scale up," Oren said.

Big bucks in contech

Notably, this past year has seen rapid technological advancements on jobsites, in part due to necessity. Contractors were faced with various COVID-19 challenges that accelerated their adoption of new tech.

"I think one of the silver linings of the pandemic is, it did push people to use technology out of necessity a little bit quicker," Abeles said.

This focus is reflected in the growing wave of contech firms that have recently had successful investor rounds.

"Our take on what happened was that basically two or three years' worth of construction tech adoption got squeezed into the nine months post-pandemic because everyone was shifting to being offsite, socially distancing and virtual tools," Henry D'Esposito, construction research lead at JLL, a global commercial real estate services company, told Construction Dive. "So, there was a huge demand for adoption. If you see rising adoption numbers, new customers, more profitability, then that gives investors a good reason to want to invest in a sector."

A report by Cemex Ventures, the corporate venture capital arm of Mexico-based construction materials company Cemex, revealed that a significant subset of winners in the space and on its top 50 list of contech startups were focused on streamlining work and enhancing productivity.

"Four or five years ago, contractors were not investing, they were testing concepts. Today, you can see contractors are really investing in venture capital as well. And that, as a result, has been a huge increase in the amount of money flowing into this," Gonzalo Galindo, the president of Cemex Ventures, told Construction Dive.

3D printing

A handful of commercial construction companies are exploring 3D printing as an alternative to traditional building components, particularly in areas where using traditional materials can lead to logistical problems.

A Skanska JV, for example, is planning to use 3D-printed concrete blocks, fabricated on site, to help with the construction of the HS1 rail project in the U.K. The machine that prints the blocks is also capable of going into tight spaces that would otherwise be hard to access. The technology, called "Printfrastructure," has proof-of-concept trials coming up this spring.

In addition, construction technology firm Icon is partnering with the U.S. government to see if 3D printing has applications for lunar construction, and the company's proprietary Vulcan technology created a 3,800-square-foot military barrack, fresh on the heels of a strong $200 million Series B funding round this past August.

With this focus has come additional funding. This past September, the University of Idaho announced that it received a $4 million award from the National Science Foundation's EPSCoR Research Infrastructure Improvement Program to study recycled materials that can be used in 3D printing. It seeks to reuse refuse from construction — in particular wood — to create a material to 3D print modular floor, wall and roof panels. 

It will be important for contractors to keep an eye on this technology, as the potential applications for 3D printed construction are vast. 

Green techniques

Environmental issues are a concern for all businesses, and as contractors try to figure out how to generate less waste on site and in the supply chain, there's incentive to do so from not only a virtuous perspective, but also a financial one. 

"In environmental issues, valuations are different and companies in carbon capture, for example, get valued very high, very quickly," Galindo said of startups which focused on environmental methods.

On Cemex's list of the top 50 construction technology startups, 14 of the featured companies focused on environmental areas.

"Environmental pressure will continue and will start increasing, especially on the building materials production side," said Galindo. "We will see much more efforts trying to reduce the carbon footprint and testing new technologies from carbon capture and research."

More established construction companies are also focusing on waste reduction goals. Earlier this past fall, contractor Webcor diverted 90% of a California office project's waste from landfills and incinerators for a year in order to meet TRUE certification requirements.

Alternative construction methods and materials, such as 3D printing and cross-laminated timber (CLT), can also enable cleaner building. Recently, Shawmut built a 75-foot-tall tower using CLT wood technology, which generates almost zero waste on site.

"You're not talking about shipping something from around the world. It's done through sustainable forests," Greg Skalaski, the executive vice president of the West for Shawmut, told Construction Dive about the material's lighter carbon footprint.

As the effects of climate change grow in intensity and priority, contractors have a growing range of technological tools to help them not only adapt, but also address the root causes of the issue and build greener from the get-go. For contractors, the message is catch up, or get left behind.

"The future has already begun. We don't have 18 months to pilot," Oren said.

With the signing of the Infrastructure Investment and Jobs Act, 2022 is shaping up to be a huge year for infrastructure. About $125 billion of these new federal funds will be available for procurement, according to Federal News Network, and it's important for contractors to understand where they're directed, the strings attached, when they will be disbursed and more.

While details are still emerging about the IIJA, here are seven things to keep in mind:

1. It puts an emphasis on public-private partnerships.

Public-private partnerships have become more popular for civil construction projects across the U.S. in the past 20 years, according to education company Lorman. The infrastructure act, which mentions PPPs 42 times, will likely popularize this type of procurement method further. Many types of initiatives listed in the act contain grantee selection criteria that consider non-federal contributions to a project, including those from public-private partnerships. 

There are three other specific measures that are likely to boost PPPs. They are:

• Section 80403 would raise the cap on private activity bonds for highway and surface freight transfer facilities. The increase from $15 billion to $30 billion should help address current demand and lower the cost of private financing on future PPP projects. 
• Section 71001 provides $100 million, disbursed over five years, for a program to provide technical assistance with PPP procurement for project sponsors that lack capacity to engage the experts they need. 
• Section 70701 requires a value-for-money analysis to ensure that certain projects — those receiving Transportation Infrastructure Finance and Innovation Act (TIFIA) and Railroad Rehabilitation & Improvement Financing (RRIF) credit assistance — evaluate whether a PPP would provide public benefit over a conventional delivery method. 

2. It boosts union and minority jobs.

President Joe Biden said the IIJA will "drive the creation of good-paying union jobs," and labor union leaders lauded its passage. The vast majority of infrastructure act funds will be covered by Davis-Bacon act worker protections. In addition, the Disadvantaged Business Enterprise (DBE) programs already in place at the U.S. DOT and the Federal Transit Administration create targets for DBE business participation in federal contracts, and will ensure that at least part of the funds are awarded to businesses led by women and people of color. 

The IIJA supports historically disadvantaged workers and union jobs in a variety of other ways, too. The act establishes a Minority Business Development Agency within the Department of Commerce to help DBE companies get access to contracts, capital and grants. In addition, the act supports the creation of training centers for the installation and maintenance of energy-efficient building technologies, run in partnership with employers and labor unions.

When implementing the work, government agencies must prioritize high labor standards, including paying prevailing wages and offering the chance to join a union. Project labor agreements, which establish the terms and conditions of work on a specific jobsite and end when the project is completed, are expected to grow in use under the law.

"While the IIJA does not mandate the use of PLAs, the Biden administration encourages and prioritize PLAs on government-funded projects," according to attorney Brian Lundgren of New York-based firm Jackson Lewis. "State and local governments, likewise, encourage, prioritize and sometimes even mandate the use of PLAs."

The act also directly supports the domestic manufacturing of railcars, electric buses, ferries and more. The IIJA strengthens requirements for iron and steel to qualify as being produced in the U.S., makes several other types of construction materials subject to these standards and strengthens origin standards for other manufactured products.

3. It encourages the use of construction technology.

The act contains $20 million per year over five years, for a total of $100 million, for advanced digital construction management systems and related technologies. The new program aims to maximize interoperability with other systems, boost productivity, reduce project delays and cost overruns, manage complexity and enhance safety and quality.

While language in the IIJA is neutral, Si Katara, co-founder and president of HeadLight, a visual-based inspection technology for infrastructure project, told Construction Dive that this funding will likely flow to visual-based inspection technologies, construction management tools, 3D modeling and digital twin technology, electronic ticketing technology and drones.

Contech experts and contractors alike welcomed the funding, though they say an even greater investment is needed. Nonetheless, they said it's a positive indicator of the sector's growth and importance. 

"The industry must, after frustratingly long delays of several decades, leverage innovation by committing to invest in advanced digital design and construction management systems," said Barry LePatner, CEO of Insights+ and founder of LePatner & Associates, in an email.

4. It focuses on environmental projects.

The IIJA marks the first major federal investment to adapt to the impacts of climate change, and also seeks to remediate ongoing sources of pollution and environmental degradation. In particular, the law seeks to make infrastructure more resilient to extreme weather, and to adopt greener technologies.

The legislation aims to upgrade power infrastructure like dams to produce and deliver clean energy across the country. It will also clean up legacy pollution from former industrial and energy sites, remove lead pipes and remedy other drinking water contaminants, reclaim mines that are no longer in use and cap abandoned oil and gas wells. It contains $47 billion for communities to adapt to fires, floods, storms and droughts, which scientists say are being exacerbated by climate change.

Nevertheless, the act doesn't do much to directly reduce climate change-inducing greenhouse gas emissions. According to climate news outlet Grist, "This infrastructure bill, which Biden initially envisioned largely as a climate package, pretty much exclusively focuses on what Republicans like to call 'traditional' infrastructure — bridges, tunnels, roads, and the like."

However, its emphasis on improving rail, buses and electric vehicle charging networks and creating safer streets for vulnerable road users like pedestrians and cyclists encourages greener transportation choices.

"Put to use wisely, that funding could do much to promote walkable communities and more sustainable development patterns,"according to the Congress for New Urbanism. 

5. It will take time to trickle to the projects that need it.

At the press conference following the legislation's passage, Biden said that Americans would start to see the impacts of the IIJA "within the next two to three months as we get shovels into the ground." While the first tranche of funds is already heading to states to improve water infrastructure and remove lead pipes, much of the funds will take more time to get to projects. 

The law is not a quick-hit stimulus package, according to Brookings Institution analysis. Rather, it's a longer-term investment, and much of the funding will be disbursed annually in set amounts for a period of five to 10 years.

For many programs, the federal government will allocate funding to states, which will then dole out money to cities and towns, leaving prioritization of projects up to the state's discretion. Most of the projects will be identified and carried out through state and local government agencies, which may need to hire experts, build out new programs, secure additional funds and more. 

"There are scenarios where the industry achieves historic growth over the next few years while looking optimistically to the flow of the infrastructure funding from the Biden administration and built-up demand delayed by the pandemic," LePatner said.

6. Roads and bridges are the biggest beneficiaries. 

The law contains a total of $284 billion in transportation spending, which goes toward many types of projects including ports and waterways, road safety projects, airports, public transportation and electric vehicle charging stations. The largest amount, $110 billion, is designated for roads and bridges. That sum is the single largest investment in repairing and reconstructing U.S. bridges since the construction of the interstate highway system, according to a White House press release.  

An estimated 173,000 miles of U.S. roads and 45,000 bridges are in major need of maintenance, per the release. This law aims to rebuild the most economically significant bridges as well as thousands of smaller bridges, and repair and upgrade crumbling roads and highways. 

It also includes the first Safe Streets and Roads for All program, with the mission of reducing traffic fatalities. The act designates $1 billion for stitching back together communities that were divided by roads or highways, in particular urban neighborhoods that were historically occupied by people of color.

A 2022-2026 Market Analysis from the American Road and Transportation Builders Association (ARTBA) indicates that transportation construction market activity will grow 5% in 2022, due to work beginning on IIJA-supported projects, as well as an improving economy. ARTBA expects the biggest growth to be in these sectors:

• Amtrak and Class 1 rail work (+17%)
• Bridge and tunnel construction (+9%)
• Port and waterway projects (+6%)
• Highways and streets (+5%)
• Airports (+3%)

Subway and light rail work, however, is expected to decline by 10%, and despite the historic investment into public transit, experts say it won't be enough to address the backlog.

7. It decreases permitting delays through One Federal Decision.

The IIJA re-establishes One Federal Decision, which aims to streamline and expedite the federal environmental review processes required for major infrastructure projects under the National Environmental Protection Act. OFD was originally part of a Trump administration executive order that was revoked by Biden earlier this year. 

OFD requires cooperation between agencies, concurrent review processes and the creation of a "permitting timetable" with a fixed deadline. The new process does not circumvent any permitting requirements, but rather reduces the time required to process surveys — and thus the monetary impact of delays on contractors — by coordinating agencies to work simultaneously. 

This process is managed through a lead federal agency. It also imposes a page limit on the review documents produced in the course of an environmental review, and installs a 90-day limit for an approval decision after the production of the review document.

AGC President Stephen Sandherr praised OFD in a press release, saying the measure would "[cut] the amount of time needed for federal reviews of infrastructure projects." In fact, analysts predict that OFD may save more than the amount of the entire infrastructure bill in costs associated with permitting delays.

This story first appeared in Construction Dive's weekly Infrastructure newsletter. Sign up here to receive it every Tuesday.