2022 industry outlook filled with optimism, but current headwinds of labor and supply chain distributions remain

Vertical growth will vary depending on level of pandemic-related influences; transportation, medical and education trending upward.

By Mike Miazga

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While signs are pointing to a positive 2022 on the nonresidential construction front, there still are headwinds to navigate, industry executives say.

“Labor is one of the biggest challenges,” Zurn vertical marketing manager Brent Davenport says. “It impacts the construction industry directly with the difficulty to find skilled/qualified workers, and indirectly because all segments will need to feel confident they can get workers before they can invest heavily in nonresidential construction projects.”

Uponor North America Commercial Segment Manager Daniel Worm agrees that the labor challenges are not new headlines.

“Labor challenges are nothing new to our industry, but they have certainly been exacerbated by the pandemic,” he explains. “Encouraging students to explore careers in manufacturing, construction and engineering is something we can all lean on as manufacturers. The headwinds we are facing today will produce a stronger, more robust industry as we move forward in the coming years.”

And one other guess as to the other headline cause for concern going into the new year.

If you said supply chain concerns, you move on to the bonus round.

“Our primary concern heading into 2022 is the ongoing supply and distribution constraints facing the marketplace,” Worm says. “Factor in rising inflation, employment shortages in the trucking and distribution industries, and rising costs of goods, all sectors of manufacturing are going to face challenges in keeping their businesses moving forward.”

Davenport says the ongoing global supply chain crisis will continue to be an important issue to track.

“Demand should fuel industrial segment growth because availability and service will be the key to win,” he says. “Companies will have a desire for heavier long-term production and warehousing investments to increase their control and reduce exposure. This will be tempered, however, by the labor shortage and difficulty in acquiring workers.”

Davenport also is keeping a close watch on the inflation needle in the United States. “The looming inflation uncertainty will have an impact,” he says. “If inflation continues, particularly as it relates to construction materials, it will slow nonresidential construction as the cost and risk of investing increase.”

Vertical Growth

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Not all doom and gloom

Sloan Senior Manager, Strategic Accounts Kim Darke-Miller says feedback from customers heading into January has been positive.

“Many customers are very positive about 2022, while some are cautiously optimistic,” she says. “A lot of customers have a large pipeline of work for 2022 and are hiring more personnel due to project volume. There is still a good mix of renovation work as well as new construction.”

Worm says Uponor tends to evaluate outlooks based off two primary indices — the Dodge Momentum Index and the American Institute of Architect’s Architecture Billing Index.

“These look closely at current billing and permitting data to help forecast future projects and opportunities,” he says.

Worm notes the Dodge index shows the nonresidential markets of commercial and institutional building projects are at the highest Uponor has seen in almost 14 years.

“We’re seeing more contractors and engineers specify sustainable solutions for their projects,” he says.

Davenport predicts the 2022 nonresidential forecast will hover in low-to-mid single-digit growth across nonresidential segments.

“The commercial segment will average out to single-digit growth, buoyed by hospitality growth in the mid-teens, offset by relatively flat expectations for office and retail-other, in line with the average,” he explains. “Industrial will show improvements from down in 2021 to single-digit growth for investments in safety, production and inventory storage. Institutional growth will be led by recovery in amusement/recreational construction and increases in health and education.”

Davenport notes an industrial swing in the 8% neighborhood, with amusement-recreation in the 10-15% increase area and health and education in that 3-5% growth window for next year. Worm adds consensus forecasts support aggregate mid-single-digit growth across nonresidential segments.

“Hospitality growth in the teens will raise the tide, office consensus is the most conservative at relatively flat,” says Davenport, noting office construction predictions range from 10% decrease to 10% growth by expert forecast, “demonstrating the uncertainty here,” he says.

Davenport also likes to keep an eye on the PIP (put in place) data reported by the U.S. Census Bureau, which tracks payments on work-in-progress construction. “There is mix shift year-to-date 2021 PIP from a traditional split of 60% nonresidential and 40% residential to a nearly even 50-50 split between the two. Nonresidential construction growth will continue to be hampered in 2022 as a result, but is expected to return to growth in 2023 and out as the split returns to more historical norms,” he says.

economic growth

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Let’s get specific

Sloan’s Darke-Miller says the transportation market, specifically airport terminals and carriers, has been very active.

“In fact, restroom renovations and upgrades or terminal expansions have been outpacing previous years,” says Darke-Miller, who notes Sloan has benefitted from many of its products being manufactured in the U.S. and being in compliance with the Buy American Act to meet project timelines. “Many are upgrading to touch-free products for their customers’ peace of mind.”

Staying with the restroom category, Kris Alderson, senior marketing manager at Bradley Corp., says the company expects to see more commercial restroom applications using touchless fixtures, strategies for creating individual containment in restroom spaces and specifying hygienic materials and surfaces.

“In particular, touchless fixtures have a positive impact on infection control, hygiene, accessibility, ease-of-use, maintenance, return on investment and are in very high demand by consumers,” Alderson says.

Alderson notes Bradley research shows 84% of Americans believe it is important for public restrooms to be equipped with touchless fixtures — things such as soap dispensers, faucets, hand dryers/towels, doors and flushers.

“When you think about it, restrooms without touch-free fixtures have about 10 touchpoints in a single visit,” Alderson says. “Not only that, washrooms tend to be tight, sometimes even cloistered, enclosed spaces that utilize water and paper products that contribute to messes, slips and falls and breed bacteria, especially in high-traffic facilities.”

Alderson cites further Bradley research that shows 70% of Americans say they are more likely to return to a business if they know it has touchless fixtures in its restrooms, while 56% of folks have a negative impression of a business that lacks touch-free fixtures.

So what else is hot for 2022? Uponor’s Worm says while the company has seen a sharp drop in hospitality and private office sectors due to a decrease in both personal and business travel since the pandemic started, signs of hospitality recovery are showing and the company is seeing major increases in projects across K-12 education, warehousing, health care and data center verticals.

“We see a strong forecast in these sectors as the future of the workplace will likely not return to pre-pandemic levels and a reliance on schools, hospitals and other large-scale facilities will grow to meet the changing marketplace,” he says.

Zurn’s Davenport also is on the hospitality uptick outlook. “Hospitality will continue to show the largest growth as it recovers from pandemic-related declines and customers are ready to get out of the house and travel post-pandemic,” he says.

Drilling deeper into the office space component, Davenport calls that segment the most unpredictable while a shift from new construction to retrofit plays out.

“Companies are reworking existing office spaces to align with their evolving return-to-work strategies and emphasis on worker safety in response to COVID-19,” he says. “The office segment is likely to remain flat in 2022, while retrofit increases to offset declines in new construction. 2023 is expected to show a return to growth.”

economic growth

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Davenport also sees growth in the medical arena. “Hospitals and clinics are expected to show growth in both new construction and retrofits to address capacity and efficiency issues highlighted by the pandemic,” he says. “The infrastructure bill also calls for significant investments in healthcare services.”

Davenport adds the education segment will continue slow growth in 2022 and continue to ramp up in the future.

“Virtual learning is not the answer and K-12, in particular, needs upgrades and more capacity that can’t be deferred much longer. Significant dollars from the pandemic stimulus expiring in 2022, and expected large investments via the infrastructure bill will have education well-funded,” Davenport states. “Strong residential growth now will also lead to future expansion requirements in education.”

Bradley’s Alderson says change will continue to come in the nonresidential restroom arena. “Architects are being charged with including individual containment options for commercial bathroom spaces, which is a departure from designing for greater space maximization to foster traffic flow and sustainability.”

Alderson notes today’s new multi-user washbasin designs have increased space between the handwashing areas to provide greater distancing while washing hands. Alderson adds other features such as occupancy monitors and fully enclosed restroom partitions are becoming more popular in an effort to provide inclusive individual containment.

“In fact, more facilities are installing sinks just outside the restroom and within hallways,” Alderson says. “Restroom layout designs, such as eliminating doors, adding S-curved and automated doors and widening doorways also are gaining traction.”

Alderson adds specifiers are also focusing more on selecting sink materials that support restroom cleanliness and maintenance.

One thing is for certain heading into the new year, companies doing business in the nonresidential sector are focused on making sure the customer experience is a complete one.

“We will continue to reengage with our customers to ensure they have what they need to deliver for their end customers,” Worm says. “We are focused on expanding our ability to serve as a complete building partner.”

Mike Miazga, is vice president of sales and membership at the American Supply Association (ASA), and the former editorial director of BNP Media's Plumbing Group.

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