There used to be a time not so long ago, when we would gauge how well Chicago construction was doing by counting the number of construction cranes on the city's skyline. The Coronavirus pandemic caused an interruption in the building boom that had been going on.
According to Chicago Business, in 2020, construction starts in the Chicago area fell 25 percent which represented $10.1 billion in projects. But, the construction industry is starting to get back on its feet. Some developers had shelved plans for big projects because they were unable to get financing. But the pandemic merely delayed other projects. Construction executives feel that the worst is over and hope that a slight recovery is already underway.
"From our little corner of the world, it's certainly a whole lot better than it was last year." The company is even hiring again.
Senior vice president of operations at WE O'Neil Construction | Damian Eallonardo
The market won't return completely this year but after this past year, even a small increase is good news for businesses and workers. Construction is one of the area's biggest industries, employing more than 120,000 people.
When the virus hit our region, it didn't stop construction already well underway. Governor Pritzker and Mayor Lightfoot allowed work to continue on existing projects. But the problem was with investors, developers and lenders who held off on new projects and were hesitant about putting money at risk at such a time. It became extremely hard to get a construction loan and with little new business coming in, contractors' pipelines began to shrink.
Chicago based contractor, Skender, felt the impact right away especially in build outs interior spaces for tenants in office buildings. The interiors business accounts for about 40 percent of Skender's revenue. Skender's revenue dropped 6 percent last year, to $390 million, and the company expects it to fall even more this year to $350 million. But construction is a lagging market, with revenue trailing bookings by many months. Skender expects their revenue to surge to $500 million by 2022.
The office interiors market still remains a big question mark. If office tenants and employees continue to work from home after the pandemic is over, will demand shrink or grow as more business will have to reconfigure their office space.
The industrial market, however, has been going strong as new warehouses are needed for logistics and e-commerce companies such as Amazon. Warehouse starts rose 25 percent in 2020, with a 2 percent gain forecast for this year.
Few contractors are building hotels and retail buildings during the pandemic but O'Neil has found some opportunities in the mall business. The company is demolishing a former Sears store at the Hawthorn Mall in Vernon Hills and preparing the property for major redevelopment that will include a large apartment building.
Many construction companies are counting on a rebound in the apartment market which was a huge growth sector during the boom. But downtown multi-family landlords have been hit especially hard and apartment development fell 56 percent in the Chicago area in the past year.
The suburbs seem to offer more opportunity. O'Neil recently broke ground on a 17 story apartment building on the former McDonald's headquarters in Oak Brook. It is forcast that there will be a 26 percent increase in local apartment construction in 2021.
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.
