SAN FRANCISCO – The first half of the year brought a flood of unexpected challenges for the construction industry, particularly in the private non-residential sector. At the national level, non-residential housing starts fell 19% in the first five months of the year, according to Dodge Data and Analytics.
In some markets where construction stoppages were ordered, the level of work fell by up to 80% during the stoppage. Most disruptive issues included construction interruption orders, new procedures to enable physical distancing on construction sites, and delays in materials, fixtures and equipment per JLL's H2 2020 Construction Outlook.
The federal government's Paycheck Protection Program (PPP) loans have been a necessary source of relief. Small Business Administration data shows construction companies had been allocated more than $ 63 billion as of June 12. While this is vital to the survival of many small and medium-sized construction companies, the PPP loans also show how badly the industry has been hit by the pandemic, as construction ranked third of all industries in terms of highest total credit value.
Employment in construction was also hit by a major shock: the largest one month (April) increase in unemployment was recorded. The construction unemployment rate rose to over 16% that month and was spread across all sectors and types of employment in the industry.
A rapid recovery in employment was a positive development in May and June, with almost half of the jobs lost in the previous two months already being restored. While the work situation was more stable in early July than it was during the first impact of the pandemic, it remained in much worse shape than at any point in the past seven years.
Prior to the outbreak of the pandemic, the construction industry was growing slowly and steadily in most sectors in 2020. The first cracks in this growth became apparent in 2019, when private construction spending slowed for the first time since the last recession, but overall forecasts remained stable. The pandemic has mixed up all expectations and completely reset forecasts.
"While an adjustment was predicted before COVID, COVID is the catalyst," Julie Hyson, project and construction manager for the JLL West region, told GlobeSt.com. "The delay indicators are due to COVID, and material / lumber prices have also increased."
The report suggests that non-residential construction is expected to decrease by 10-15% in 2020. The decline will be the combined result of the disruption from shutdowns (construction at sites)
with temporary declines averaging 70%), along with decreased demand for new projects in some sectors hard hit by the pandemic, including retail, entertainment, and office.
"In a way, this year, as the market changed, new underlying assets were set," Hyson told GlobeSt.com. “This will translate into an optimism for growth from 2022 to 2024 that will remain much higher than it was before the coronavirus recession. This is a normal development based on previous recoveries. "
One area that saw an upswing during the pandemic was technology acceleration. This leads to a permanent and industry-wide increase in the adoption of construction technology. Much like the rest of the economy, the construction industry and the broader office-based portion of the AEC industry were forced to conduct a remote work experiment this year that tested existing technology systems. Personnel on construction sites
Boundaries and distancing requirements increased the demand for cloud-based technology to make sharing plans and schedules easier. New health and safety requirements created an entirely new class of problems for the technology to solve, from health surveillance to contact tracing, and an already burgeoning construction technology industry saw an increase in immediate demand.
These immediate impacts have been labeled as a technology imperative or a move by companies to adopt technology as it is a necessity during this pandemic rather than an optional investment in future efficiencies. The technological drive of the construction industry will lead to a permanent increase in acceptance, as construction companies that are forced to cope with the challenges of integration quickly will also benefit from the efficiency of the new tools in the long term. Some of the areas of construction technology that are expected to benefit the most are digital collaboration tools, wearables for construction, and off-site construction methods that offer both immediate benefits in the coronavirus environment and consistent benefits once the pandemic hits is fixed.
"These tools used to be a 'nice to have' and are now a must-have as the teams get paid more geographically," Hyson told GlobeSt.com. “The question is how long an adoption period will be, how long it will be, or whether it will last at all. The technology that will lead and persist will be tools that use AI to capture data and real-time insights. Tech will do more to provide workplace strategies and systematic change by looking inside buildings. "
An example of this technology is used in PRA Health Sciences' new bio-laboratory in Kansas City. The remote project team receives virtual real-time site walks of the project every week. This technology tracks progress over time while capturing inventory conditions.
The recovery in the construction industry will be inconsistent across industries until the health concerns of the pandemic are addressed. Due to the lower baseline set in 2020, JLL expects both construction volume and costs to increase in 2021, although neither is likely to return to the 2019 highs. Looking ahead, JLL's new forecast combines a number of possible scenarios, broken down into individual periods of crisis and recovery.