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U.S. contractors pessimistic about most construction sectors for 2021

DCN-JOC News Services
U.S. contractors pessimistic about most construction sectors for 2021

ARLINGTON, VA. — Most U.S. contractors expect demand for many types of construction to shrink in 2021 as the pandemic prompts many owners to delay or cancel already planned projects, a new survey of contractors reveals as part of a 2021 construction business outlook report.

The report, titled The Pandemic’s Growing Impacts on the Construction Industry: The 2021 Construction Hiring and Business Outlook Report, was released Jan. 7 by the Associated General Contractors of America and Sage Construction and Real Estate.

“This is clearly going to be a difficult year for the construction industry,” said Stephen Sandherr, the association’s CEO, in a statement. “Demand looks likely to continue shrinking, projects are getting delayed or cancelled, productivity is declining, and few firms plan to expand their headcount.”

The percentage of respondents who expect a market segment to contract exceeds the percentage who expect it to expand — known as the net reading — in 13 of the 16 categories of projects included in the survey. Contractors are most pessimistic about the market for retail construction, which has a net reading of negative 64 per cent. They are similarly concerned about the markets for lodging and private office construction, which both have a net reading of negative 58 per cent.

Other construction categories with a high negative net reading include higher education construction, which has a net reading of negative 40 per cent; public buildings, with a net negative of 38 per cent; and K-12 school construction which has a net reading of negative 27 per cent.

Among the three market segments with a positive net reading, two — warehouse construction (plus 4 per cent) and the construction of clinics, testing facilities and medical labs (plus 11 per cent) – track closely with the few segments of the economy to benefit from the impacts of the coronavirus.

Firms report that many of their already scheduled projects have either been delayed or cancelled. Fifty-nine per cent of firms report they had projects scheduled to start in 2020 that have been postponed until 2021. Forty-four per cent report they had projects cancelled in 2020 that have not been rescheduled. Eighteen per cent of firms report that projects scheduled to start between January and June 2021 have been delayed. And eight per cent report projects scheduled to start in that time frame have been cancelled.

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 per cent of firms expecting demand to return to pre-pandemic levels within the next six months. Fifty-five per cent 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.

Only 35 per cent of firms report they plan to add staff this year. Meanwhile, 24 per cent plan to decrease their headcount in 2021 and 41 per cent expect to make no changes in staff size. 

“The unfortunate fact is too few of the newly unemployed are considering construction careers, despite the high pay and significant opportunities for advancement,” said Ken Simonson, the association’s chief economist. “The pandemic is also undermining construction productivity as contractors make significant changes to project staffing to protect workers and communities from the virus.”

Simonson noted 64 per cent of contractors report their new coronavirus procedures mean projects are taking longer to complete than originally anticipated. And 54 per cent of firms report that the cost of completing projects has been higher than expected.

Officials with Sage noted that firms are being more strategic about information technology as they try to remain competitive in the current environment. Sixty-two per cent of contractors indicate they currently have a formal IT plan that supports business objectives, up from 48 per cent last year. An additional seven per cent plan to create a formal plan in 2021.

The outlook was based on survey results from more than 1,300 firms from all 50 states and the District of Columbia.

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