As supply chains and material prices continue to stabilize, the U.S. and Canadian construction industry is positioned for success in 2024.

The need for housing and some companies requiring employees to return to the office is expected to propel the industry forward, according to JLL's U.S. and Canada Construction Trends 2024 Forecast.

"The industry is ready to successfully meet the challenges of 2024," said Todd Burns, JLL's president of project development services for the Americas. "With immense housing needs, return to office strengthening and federally backed infrastructure and manufacturing accelerating, the industry is poised for growth despite challenges."

JLL expects construction spending to remain stable in the U.S., but material costs are likely to increase by 2% to 6% and employee wages to rise by 3% to 5% for a total cost increase of 2% to 4%.

Construction activity in Canada is expected to slow for the next few quarters, but if inflation eases and debt markets stabilize, builders will gain more confidence, which could to a rebound in starts by spring. Material costs are expected to rise by 3% to 5%, and employee wages are expected to go up by 4% to 6% for a total cost increase of 3% to 6%.

"Construction investment in Canada reached record levels in 2022, due primarily to booming residential and industrial sectors," said Rob Ramsay, executive vice president and national lead of project and development services for JLL Canada. "Rising interest rates have dampened activity by slowing the demand for real estate. A silver lining to a slowing economy is that softened demand normalizes inflation and helps to clear up supply chain bottlenecks."

Labor shortages are expected to persist as more workers leave the industry. Although advancements in technology will help, they can't replace the need for labor. Workers need both technical ability and soft skills for problem-solving and innovation, Ramsay said.

Scott Figler, JLL's national research director in Canada, noted that Canada's construction wages were up by 5% to 7% from 2022 to 2023 and said he expects high wage growth to continue well into 2024 at around 4% to 6%.

"With cost pressures easing on the material side, most of the current cost inflation can be attributed to rising wages," Figler said.

Overall, the outlook for the construction industry is positive. The construction industry has been addressing the complex issues revealed in the built environment during the pandemic.

"For a successful year ahead, it is imperative that industry leaders keep three strategies in mind," Burns said. "They must know their people in order to retain talent, know their projects to understand what technologies can be used to assist and know their markets in order to anticipate what is coming next and plan for success."