More than 10 months since the first coronavirus cases were reported in Wuhan, China, COVID-19’s global spread continues to plague commercial construction.
Since the pandemic hit the U.S., contractors across the country have faced a range of obstacles including layoffs, project shutdowns and increased construction costs.
As 2020 comes to a close, economists and industry experts predict many of these issues will continue to challenge contractors. Here are the top seven factors to watch:
Labor shortage. Pre-pandemic, the industry faced a historic shortage of skilled labor and the issue isn’t going away just because COVID-19 has shut down projects and slowed others. Although firms have been calling back workers who were laid off in the spring, some have refused to return to work, citing a preference for unemployment benefits, virus concerns or family responsibilities.
Shrinking backlog. Associated Builders and Contractors’ Construction Backlog Indicator fell to 7.5 months in September, a decline of 0.5 months from August’s reading and 1.5 months lower than last year at this time. In addition, the association’s Construction Confidence Index readings for sales and profit margins also decreased.
Falling construction costs. A variety of pandemic-related forces have caused construction costs to decline slightly for the first time in a decade, which could lead contractors to feel a pinch in profits.
Less work. Various sectors of commercial construction will continue to experience a decline even after the rest of the economy begins to recover from COVID-19, economists say. For instance, experts predict people will continue to work from home more often then they go into a central office, so construction of office buildings remains a gray area in terms of future growth.
Price increases. This year has seen fluctuations in the prices of construction materials, most recently with the skyrocketing cost of lumber. Prices have been rising on most materials since May, according to ABC.
Supply chain issues. “Production is getting back to where it was internationally,” Daniel Pomfrett, vice president of Los Angeles-based project management and cost consulting firm Cumming Corp said, “but the strain on supply chains and how to get materials and equipment delivered remains.”
Diminished state and local government revenues. Anirban Basu, ABC Chief Economist in a release about the indicator said this is one of the top challenges facing contractors right now. A report from the Brookings Institution projects that state and local government revenues will decline $155 billion in 2020, $167 billion in 2021 and $145 billion in 2022 — about 5.5%, 5.7% and 4.7%, respectively — excluding the declines in fees to hospitals and higher education.