By Chris Coleman, HUB International
Inflation may be moderating in the U.S., but it’s still a force exerting its influence on the construction industry as it heads toward 2025 with uncertainty still the dominant sentiment.
By mid September, the annual inflation rate in the U.S. had declined to 2.5%, the lowest since February of 2021 and below the long-term average of 3.28%. While it will take residential housing time to rebound from high interest rates, pressures have moderated on costs and supplies of building materials. And as market conditions continue to improve, projects that were sidelined are bound to be brought back into play.
One by-product of inflation is the now-systemic risk of the “Great Reset” of the real estate debt market as $320 billion in outstanding debt matures over the next two years. The issue is how borrowers will fare when costs of capital are high, office vacancies are at 20% and lending standards are tight. If a broader lending pullback results, construction is one of many sectors that would be affected.
The inflationary environment and all its impacts are forcing the industry to get creative. One pivot is to different construction methodologies like 3-D-printed and prefabricated construction, which should see a compounded annual growth rate of 6% through 2028. And increasingly, mid-sized firms are forming joint ventures to get a piece of today’s complex mega projects.
Here’s how construction firms can position themselves optimally for the risks with insurers:
- Become best-in-class with risk management plans for jobsites and mitigation technology investments
- When projects and equipment are accurately valuated, so are associated insurance coverages
- Build a benefits plan that goes beyond wages to address the health and wellness issues that matter the most to millennials and Generation Z workers
- Ensure your broker is the right guide for a risky environment
Click here to read more from Hub International’s Chris Coleman.
Chris Coleman is the commercial sales leader for global insurance brokerage Hub International. He has over 20 years of commercial insurance and risk mitigation experience. With a background in underwriting and brokerage, Chris brings best in class solutions to a broad mix of businesses, including construction, real estate and manufacturing. His focus is on multifaceted solutions that help clients solve their ever evolving risk and people challenges.
