The year 2023 began with uncertainty in the US, with banks collapsing, inflation at record highs, and layoffs increasing. As the AEC sector braces for potential impact, the question is how well it will be insulated to weather a possible impending recession. In order to get an answer and understand the AEC industry’s preparedness, it is crucial to examine the history of the 2007-2009 recession, the benefits outsourcing brought to those who took advantage and the recent legislation passed.
An economic crisis refers to a time of severe economic downturn marked by a major drop in economic activity, rising unemployment, inflation, instability of the financial markets, and a loss of consumer and investor confidence. The 2007–2009 recession had a significant impact on the AEC industry, with dropping revenue and growing unemployment rates. The construction sector suffered a sharp decline in investment on both residential and commercial building projects. Many firms encountered financial challenges, reducing their workforce, postponing or canceling projects, and cutting profit margins. AEC companies also had fewer opportunities to win public contracts as a result of the recession’s reduced funding for infrastructure projects.
One thing that some AEC firms did during the last recession was outsource several functions, which helped reduce costs. Outsourcing offers increased efficiency, access to specialized expertise, improved flexibility, and enhanced innovation. Companies can focus on their core competencies, leading to increased efficiency and productivity. Some functions outsourced included architectural and engineering CAD design services, BIM services, construction documentation, 3D visualization, HR and recruitment services, payroll services, collections services, marketing, IT support and sustainability consulting.
Everyone is looking for the signs of a 2023 recession. Some indicators are: a declining GDP, growing unemployment rates, drop in consumer spending, falling stock prices, and decline in industrial activity. It is still unknown how the AEC sector will be impacted. However, the recently passed Bipartisan Infrastructure Law which has added $550 billion into the economy in new federal infrastructure investments over the next five fiscal years looks to have a significant impact. The rising demand of public projects on the horizon will help those AEC companies who have the capability and resources to work public projects, and may weather the storm economic better. With unemployment rates being at record lows at only 1.3% for the AEC sector, project managers, architects, engineers, designers, drafters and superintendents are in short supply. They will look for stability if they see the storm clouds rolling in. Are you able to shelter those professionals and keep them well insulated with private and public projects while everyone waits for the storm to pass?
Yes, it is possible that a recession may not occur in 2023, as economic conditions are subject to change and can be influenced by a range of factors. However, it is still important for the AEC sector to be prepared for potential economic downturns by implementing measures that can help reduce costs, increase efficiency, and enhance their resilience. This may include outsourcing non-core activities, adopting sustainable practices, and exploring both public and private contracts. By doing so, the AEC sector can position itself to weather economic challenges and thrive in both good and bad times.