Most contractors expect demand for many types of construction to shrink in 2021 and the pandemic is prompting many owners to delay or cancel already-planned projects which will mean that few firms will hire new workers according to survey results released by the Associated General Contractors of America and Sage Construction and Real Estate.
Building Design + Construction reports that Stephen E. Sandherr, the association's chief executive officer stated that the demand looks likely to continue shrinking, projects are getting delayed or canceled, productivity is declining and few firms plan to expand their headcount.
Few firms expect the industry will recover to pre-pandemic levels soon. Only one-third of firms report business has already matched or exceeded year ago levels, while 12% of firms expect demand to return to pre-pandemic levels with the next six months. Fifty-five percent report they either do not expect their firms' volume of business to return to pre-pandemic levels for more than six months or they are unsure when their businesses will recover.
An article in Construction Dive states that contractors expect 13 of 16 construction categories to shrink in 2021 with only alternative healthcare facilities, warehouses and water and sewer facilities eking out small gains.
On a webinar covering the results of the survey two weeks ago, which canvassed 1,300 construction firms in November and December, contractors lamented the difficulty of finding new projects and the challenges of keeping the ones they already have on track due to COVID-19 mitigation and productivity losses. Let DataBid help you find all the projects you need easily and effortlessly.
During the webinar, contractors noted the challenges that they had in 2020 and the increased struggles they see ahead in 2021.
Michael Kennedy, CEO of St. Louis, Missouri-based design-build contractor KAI Enterprises, said that while existing bond programs had allowed his firm to continue to land jobs, he expected 2021 to display a stark delineation among contractors.
"We're going to see the haves and have-nots. Are you on those big jobs? Are they already pregnant and moving? That's the haves. The have-nots are the people who are still waiting for some developer to close on something, and unsure about the job."
CEO Design-build contractor for KAI Enterprises | Michael Kennedy
Bob Schafer, president of West Palm Beach, Fla.-based road builder Ranger Construction Industries, said that even though unemployment in many sectors is high, he still has challenges hiring skilled workers, where much of his business remained on track throughout 2020 as people from the Northeast flocked to the state.
He also noted increased costs on the materials side, including steel, cement, liquid asphalt and aggregates.
According to Ken Simonson, chief economist for AGC, the percentage of contractors who expected the dollar value of projects to shrink versus expand is overwhelmingly negative. The following is what construction categories contractors expect to see shrinking in 2021:
- Retail (-64%)
- Lodging (-58%)
- Private Office (-58%)
- Higher Education (-40%)
- Public Building (-38%)
- K-12 School (-27%)
- Transportation (-19%)
- Manufacturing (-17%)
- Bridge/Highway (-11%)
- Federal (-10%)
- Multifamily Residential (-8%)
- Power (-8%)
- Hospital (-3%)
- Water/Sewer (+1%)
- Warehouse (+4%)
- Other Healthcare (+11%)
Simonson said that 44% of firms reported they had projects canceled in 2020 that had not been rescheduled, and that companies anticipate a continued bloodletting in 2021.
"Even for this first half of 2021, 18% of firms report that projects scheduled to start between January and June have been delayed and 8% report projects scheduled to start in the first half of this year have been canceled. As a result, few firms expect the industry will recover to pre-pandemic levels any time soon."
Chief economist for AGC | Ken Simonson
Contrary to all of this negative news, some contractors said they would get through 2021 by streamlining operations, cutting costs to conserve cash and finding jobs wherever they can.
According to The Spokesman-Review, contractors have made significant changes to staff scheduling and project management to protect workers and communities from the spread of COVID-19, but those changes impact productivity and extend project timelines.
Warehouse construction will see a short term increase that will be driven by e-commerce companies needing inventory storage because people are shopping online during the pandemic. Once people are vaccinated, this might decrease but that is to be seen.
Editor's note: This is, indeed, a confusing time for the construction industry. DataBid is working tirelessly to report and distill the news that can help you and your company make the right decisions and keep you up to date on the constant changes as they are made. We hope our coverage brings some clarity amid all the confusion.
Posted by Judy Lamelza