Construction: The Next Five Years What the industry sees today and predicts for tomorrow.

— GLOBAL REPORT

CONSTRUCTION: THE NEXT FIVE YEARS | 2

“Change is inevitable and as a business we are optimistic about the changing industries and the positive impact it will have on the construction industry and economy.”

Head Contractor, CEO, Australia

— EXECUTIVE SUMMARY

When the pandemic hit, the impacts were immediate. From March to April of 2020 alone, construction employment declined by 975,000 jobs1––that’s about 13% of the USA construction workforce.2 New safety protocols were mandated, supply chains were interrupted, jobsites were closed, and contracts were terminated to control expenses.

But with over a year of adaptability under our belts, the industry’s resilience is astounding, and the future looks bright. With 26,000 jobs added in September,3 the construction industry has recovered approximately 64% of the jobs lost since the start of the pandemic, with total construction employment at 3.3% below pre-pandemic levels.4

With 2020 in the rearview, the industry looks quite different. If COVID-19 taught the construction industry anything, it’s that even near-total disruption of all projects and processes is a possibility.

As disruptive a force as the pandemic has been on global construction work, it gave construction a much-needed digital facelift. After witnessing new operational efficiencies, the industry’s relationship with technology looks very different going forward. To gauge current workforce sentiments and thoughts on the future, we look to our customers and prospects—as we always do—to shed some light.

We surveyed 1,822 Procore customers and prospects from around the globe. Here’s what they had to say.

Footnotes:1. Associated Builders and Contractors Inc. (ABC) https://www.agc.org/news/2020/05/08/agc-coronavirus-survey-results-6th-edition 2. Statista 2021 (https://www.statista.com/statistics/1116499/covid-19-us-construction-industry-jobs/#:~:text=Due%20to%20the%20

global%20pandemic,of%20the%20country%27s%20construction%20workforce)3. Bureau of Labor and Statistics (https://www.forconstructionpros.com/home/press-release/21196421/associated-builders-and-

contractors-inc-abc-construction-continues-to-recover-jobs-since-the-start-of-the-pandemic)4. Marcum Commercial Construction Index (https://www.marcumllp.com/insights/four-things-to-watch-in-2021)

CONSTRUCTION: THE NEXT FIVE YEARS | 3

Global Participants We surveyed 1,822 Procore customers and prospects from around the globe. The data includes general contractors, specialty contractors, and owners from companies and public entities of all sizes. All survey responses are self-reported and, unless otherwise noted, all references to customers, users or any individual stakeholder group mentioned herein refer to the population surveyed.

Audience Breakdown General Contractors 62%Specialty Contractors 17%Owners 20%

Regional Breakdown United States of America 57%Canada 24% Australia & New Zealand 17%United Kingdom 3%

Contents01 Optimism in 2021 05

02 Labour Shortage 10

03 Project Cost Management 14

04 Closing 18

06 Appendix 19

CONSTRUCTION: THE NEXT FIVE YEARS | 5

01 The survey responses’ general theme speaks to a positive outlook, increased activity, and growth into 2021. Our industry feels they have a healthy project pipeline and an expectation of more volume, more projects, more clients, and more activity overall moving into 2021. For example, in open-ended responses, respondents mentioned the word “growth” 144 times.

But this optimism coexists with a healthy amount of anxiety around whether or not the world will return to normal this year. Even though growth seemed to be the key theme in the opening 2021 outlook question, our industry’s optimism hinges upon whether or not we will be able to overcome COVID-19. The economy is also mentioned almost 100 times, demonstrating that our audience is only optimistic about the economy and growth if we can beat COVID.

— CHAPTER 01 Optimism in 2021

“We have a diversified company—site work and concrete division, architects on staff—as well as a strong repeat customer base; our backlog is still strong, and we are breaking into new sectors. Additionally, we are a big family; our culture is just getting stronger.”

General Contractor, Project Coordinator, USA

CONSTRUCTION: THE NEXT FIVE YEARS | 7

Outlook for 2021

Construction being recognized as an essential service

Faster adoption of existing technologies within the industry

Stronger industry partnerships

Pent-up demand for construction, increasing backlog

Emergence of new and innovative technology

More visibility and actionable insights from project or financial data

Renewed focused on diversity and inclusion in construction

Long-term funding and solutions to aging infrastructure

Adoption of alternative project delivery methods (e.g. design-bid-build, Lean IPD)

11%

51%

15%

49%

7%

46%

5%

30%

5%

29%

4%

29%

4%

27%

First choice % Marked as any level of importance

Survey Question: Of the following, what are you most optimistic about when looking at your business in 2021? Please rank up to 4 in order of importance, with 1 being the most important.

With all the jobs lost due to the pandemic, participants also appear comforted by their work’s essential nature. When asked what they were most optimistic about for 2021, construction being recognized as an essential service ranks highest at 68%, followed by faster adoption of existing technologies within the industry and stronger industry partnerships at 52% and 51%, respectively.

On March 19, 2020, the USA Federal government published that “working construction” was deemed “essential to continued critical infrastructure viability.” This meant construction could continue––albeit at a different capacity––while many other businesses were shut down.

Faster adoption of existing technologies was second (52%), consistent with the rush toward digitization we saw this past year. Stronger industry partnerships (51%) and pent-up demand for construction (49%) were neck and neck in survey respondents’ sourcing their optimism.

68%34%

52%15%

CONSTRUCTION: THE NEXT FIVE YEARS | 8

Looking ahead to 2025 When asked the same question for 2025, this anxiety appears to dissipate to some degree with enthusiasm about technology taking the front seat. The emergence of new and innovative technology and the faster adoption of existing technologies within the industry rise to the top at 60% and 53%. Construction being recognized as an essential service drops to the bottom four, coming in at 37%.

Faster adoption of existing technologies within the industry was the most important thing to more respondents than any other option, indicating the next generation’s hope that construction continues to seek robust technological solutions going forward. Significantly—given the deepening relationship between construction and tech—while faster adoption is the most important, the emergence of new and innovative technology (60%) is close behind and is considered to be of the highest importance overall.

While responses show technology is considered a critical construction factor five years out, survey sentiment doesn’t specify either the technology behind alternative delivery methods or technology’s ability to provide competitive insight through its strategic interpretation of project data.

Survey Question: Of the following, what are you most optimistic about when looking at your business in 2025? Please rank up to 4 in order of importance, with 1 being the most important.

Faster adoption of existing technologies

Emergence of new and innovative technology

Construction being recognized as an essential service

Stronger industry partnerships

Pent-up demand for construction, increasing backlog

Long-term funding and solutions to aging infrastructure

Renewed focused on diversity and inclusion in construction

Adoption of alternative project delivery methods (e.g. design-bid-build, Lean IPD)

More visibility and actionable insights from project or financial data

First choice % Marked as any level of importance

16%

37%

37%

15%

56%

12%

8%

38%

6%

29%

5%

35%

5%

31%

53%18%

60%16%

“I’m most optimistic about reliance and opportunities for digital ways of working. Demand for remote working has been a catalyst for the uptake and investment in digital tools and record procedures.”

Main Contractor, BIM Manager, United Kingdom

CONSTRUCTION: THE NEXT FIVE YEARS | 10

02It’s apparent that the construction culture is rife with pandemic-fueled anxiety at this time and likely will be for years to come, given the dramatic business setbacks and human cost attributable to the global health crisis. When asked to rank top concerns for their businesses in 2021, global economic slowdown is first at 65%, with tighter margins and labour shortage following at 60% and 52%, respectively (see table on page 11). Labour shortage is the number one concern the most often, but it is only in the top four 52% of the time.

According to AGC’s 2020 Construction Hiring and Business Outlook, 81% of construction businesses struggle to find qualified skilled labour.1 While labour shortage is a huge issue, more respondents are concerned about the effect a slowing economy would have on their ability to make their margins—and stay in business.

When asked to look ahead five years, participants answer the same question by citing three top concerns. Here labour shortage rises

to the top of the list––tied with global economic slowdown at 54%. Tighter margins is only one percent behind, at 53%.

This makes sense since labour shortages are typically a side-effect of booming productivity. The absence of skilled labour to perform the work is one thing; not having work to do is arguably a much more significant concern. There is a large gap after the top three choices, with same schedule expectations a distant fourth.

The least concerning topic by number of responses was the reluctance of business to adopt new technologies. This further demonstrates the rapid digitalization construction has seen over the past year. It’s no longer a question of construction investing in tech. The pressing question going forward is that of construction’s willingness to adopt evolving new technologies as they emerge in the marketplace. Will construction avail itself of continuously improving technology?

— CHAPTER 02 Labour Shortage

Footnote: 1. Associated General Contractors of America - 2020 Construction Outlook (https://www.cisa.gov/sites/default/files/publications/CISA-Guidance-on-Essential-Critical-Infrastructure-Workers-1-20-508c.pdf)

CONSTRUCTION: THE NEXT FIVE YEARS | 11

Global economic slowdown

Tighter margins

Labour shortage

Same schedule expectations with less reliable material delivery/logistics

Increase in regulations and compliance requirements

Skills gap

Increased competition

Lack of resources to invest in business growth and technology

My business’ ability to adapt to unforeseen circumstances

Survey Question 6 - Of the following, what are your top concerns for your business in 2021? Please rank up to 4 in order of importance, with 1 being the most important.

“I’m most concerned about a shortage of skilled labour or delayed supply chains that could cripple our project schedules.”

General Contractor, Project Executive, USA

2021 Labour Shortage Outlook

First choice % Marked as any level of importance

24%

52%

38%

9%

47%

7%

5%

37%

8%

33%

1%

19%

3%

2%

18%

15%

65%23%

60%17%

Reluctance of business to adopt new technologies

CONSTRUCTION: THE NEXT FIVE YEARS | 12

Survey Question: Of the following, what are your top concerns for your business in 2025? Please rank up to 4 in order of importance, with 1 being the most important.

Labour Shortage Outlook for 2025Given the same list and looking to 2025, labour shortage is the most significant long-term concern.

When the recession hit in 2007, few industries were hit harder than construction, which slipped into decline earlier and recovered later than any other job sector. The US industry was forced to lay off more than two million workers, and many older professionals either retired or left the field altogether to find more secure work. To make matters worse, while companies lost seasoned professionals, the compensating influx of talent waned.

Today, construction’s labour pool is besieged on two fronts; the dual pressures of an aging workforce and fewer younger workers pursuing careers in the trades. Workforce development teams work around the clock to change this downtrend and the archaic misperceptions that drive it.

Similar to responses in 2021, people are not concerned about issues of technology adoption.

Labour shortage

Global economic slowdown

Tighter margins

Increased competition

Increase in regulations and compliance requirements

Skills gap

My business’ ability to adapt to unforeseen circumstances

Same schedule expectations with less reliable material delivery/logistics

Lack of resources to invest in business growth and technology

Reluctance of business to adopt new technologies

First choice % Marked as any level of importance

12%

53%

43%

11%

42%

9%

8%

43%

4%

20%

4%

32%

3%

3%

22%

18%

54%26%

54%20%

“I’m most concerned about having enough skilled labour to keep up with the work load.”

Head Contractor, Site Manager, Australia

CONSTRUCTION: THE NEXT FIVE YEARS | 14

03 — CHAPTER 03 Project Cost Management

Upon closer examination of both the concerns and hopes for the future, a common theme keeps coming up––financials. Related topics, including financials, profits, cost controlling, and margins (along with connecting the field and office), are consistently ranked at or near the top. When asked what problems they are trying to solve by investing in technology, budget and job costing (64%), connecting the field and office (57%), and cost controls (55%) are the top three––followed closely by quality and jobsite safety (47%).

With recession and market devaluation looming threateningly on the sidelines, margins matter more than ever. In chaotic economic times, the financial alignment of construction project owners and the contractors reporting to them is more critically important than ever. Visibility into a project’s real-time financial data is critical

and if this deep project visibility is available from any physical location—all the better. Access to deep project data is not just a guarantor of project momentum—real-time, dynamic information is the armor protecting capital investment. Digital invoices, change orders, and signatures ensure not only that the right things are getting done but that everyone is being paid as quickly and efficiently as possible. Significantly, the digital ecosystem automatically compiles, organizes, and preserves in perpetuity thorough archival documentation of the project’s evolution through its entire life cycle.

The construction project owners, already looking ahead at the challenges of accommodating dynamic global population demographics, will need more than projections to avoid a misstep and emerge with future-forward positive outcomes.

Future of Financial TechnologyThe desire for sophisticated financial technology, and its overall importance to the industry, was further highlighted when we asked which continuing education topics related to construction or technology they would prefer. Fitting the overall narrative, financial management and forecasting are at the top, with 41% of participants wanting Procore to provide more context around the topic. Furthermore, over 50% of emerging contractors ranked financial management and forecasting first as the topic they’d like us to cover this year.

This recurrence of economic sentiment is a reminder of financials’ primacy in the successful construction project and the need to broadly improve the sector’s grasp of the digital financial tools at their disposal. The industry is still seeking solutions to construction financials’ complexities, particularly regarding margins, controlling a bottom line, cost management, and forecasting.

Wes Simpson, Green Mechanical, USA

“We had our best year in 35 years as a company after using Procore for one year.”

“Cost control all across the board is becoming more difficult. Fluctuation in both material and shipping prices makes it difficult to forecast costs accurately.”

Owner, Controller, USA

CONSTRUCTION: THE NEXT FIVE YEARS | 17 Investing in Construction Technology: Pain Points & PrioritiesRapid decision-making, informed capital commitment, ability to turn corners quickly and capably ––these will be the necessary traits of tomorrow’s leaders.

Connecting the field and office

Quality

Talent attraction

Competitive advantage

Lack of visibility into project statuses

Tracking labour productivity, staff and manpower

Enabling a distributed workforce

Risk and liability management

Lack of business analytics

Budget and job costing

Schedule controls

Cost controls and cost forecasting

Poor data quality / inconsistent data

Jobsite safety

Single source of information from precon thru closeout

Communication across stakeholders

Scalability and growth of business

Rework

57%

52%

22%

45%

26%

37%

19%

36%

19%

64%

33%

55%

28%

47%

30%

43%

20%

27%

Survey Question: What problems are you trying to solve by investing in construction technology? (Select all that apply)

Top 5 Results

1. Budget and job costing — 64%2. Connecting the field and office — 57%3. Cost controls and cost forecasting — 55%4. Quality — 52%5. Jobsite safety — 47%

CONSTRUCTION: THE NEXT FIVE YEARS | 18

04The world is changing. With increased globalization and mobility, we are witnessing the acceleration of technology, conscious acculturation of the workplace, and a dire callout to the nextgen construction worker; a chronically misperceived job title that will become increasingly allied with technological advances that stand to boldly reconceive the built world. They say with struggle comes progress––this outlook is proof of that.

At Procore, we have a vision of the future rooted in the present. Despite everything 2020 threw at us, the built world grew apace. That’s not by accident. It’s because of our Groundbreakers – the innovators and pioneers in our industry. Managing change is ingrained in the work we do every day—schedules change, designs change, budgets change—yet our industry soldiers on as one united family, determined to build the communities we serve; indeed, the communities we inhabit.

As we all navigate these challenging times, construction technology remains steadfast in bringing people together to facilitate better connectivity, greater transparency, and improved safety. At Procore, our mission is to connect everyone in construction on a global platform, and we remain committed to doing precisely that.

We’re proud to support the people in construction who continue to build our communities––from the hospitals we so desperately need to the largely unsung and unseen infrastructure we rely on.

Hear more from your peers and learn how Procore customers are improving performance and transforming how we build in the 2021 ROI Report.

— CHAPTER 04 Closing

CONSTRUCTION: THE NEXT FIVE YEARS | 19

AppendixRegion, Company Type and Annual Construction Volume.

RegionUS 57%CAN 24%ANZ 17%UKI 3%Total 100%

Company TypeGeneral Contractor 62%Specialty Contractors 17%Owners 20%Total 100%

General & Specialty Contractor < $1 Million 3%$1 - $5 Million 12%$6 - $10 Million 10%$11 - $20 Million 13%$21 - $50 Million 16%$51 - $100 Million 15%$101 - $200 Million 10%$201 - $500 Million 10%$501 Million - $1 Billion 6%$1.1 - $5 Billion 4%$5.1+ Billion 1%Total 100%

Owners $1 - $5 Million 14%$6 - $10 Million 6%$11 - $20 Million 10%$21 - $50 Million 16%$51 - $100 Million 16%$101 - $200 Million 14%$201 - $500 Million 11%$501 Million - $1 Billion 4%$1.1 - $5 Billion 8%$5.1+ Billion 1%Total 100%

Total: Q8, Q10, Q11

Q8. What changes is your business making in 2021? (Select all that apply)

Increasing jobsite hygiene and safety as a lasting result of coronavirus 54%

Reducing spending / overhead 48%Entering new markets 48%Increasing investment in technology 47%Finding efficiencies in your capital expenses 43%Bringing more functions in-house / self-performing more work 38%Leveraging data and predictive analytics 28%Developing a holistic technology strategy 21%Slowing growth and expansion 17%

Q10. Which topics directly related to construction and/or technology would you like us to cover this year? (Select up to three)

Emerging technologies 48%Financial management / forecasting 42%Software integrations 40%Data, analytics, insights 35%Safety management 32%Economic forecasts 26%Prefabrication / off-site construction 28%Other, please specify: 3%

Q11 - What topics outside of construction and/or technology would you like Procore to create educational content about this year? (Select up to three)

Professional development (leadership training, coaching) 49%

Technology adoption 35%Remote work and work-life balance 35%Change management 31%How to look attractive to potential clients, building your company’s brand

28%

Hiring, maintaining, and retaining top talent 28%Industry transformation 24%Culture 17%Inclusion & Diversity 11%Other, please specify: 1%

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Procore manages your projects, resources and financials from project planning to closeout. Our platform connects every project contributor to solutions we’ve built specifically for this industry—for the owner, for the GC, and for the specialty contractor. Our App Marketplace has over 150 partner solutions that integrate seamlessly with our platform, giving you the freedom to connect with what works best for you, even if we don’t build it. The ability to easily communicate across disparate teams makes it easier to work together by eliminating silos and establishing a single source of truth. It’s how Procore gives your team access to everything they need to know to get their job done.

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