Trends and Impact of COVID-19 on Commercial Building Construction in the US

Trends and Impact of COVID-19 on Commercial Building Construction in the US

Three impacts of the COVID-19 pandemic on commercial building constructions in the United States are project postponements and cancellations, loss of jobs, and productivity and profit losses. ABC’s Construction Backlog Indicator reported that the commercial building sector’s collective project backlog was 8.9 months as of March 2020.

Impact of COVID-19 on Commercial Building Construction in the US

1. Project Postponements and Cancellations

  • According to an industry report by Research and Markets, COVID-19 had a significant negative effect on the commercial building construction sector.
Commercial Projects entering planning stage

2. Loss of Jobs

Construction Employment Statistics: March 2020
  • The need for social distancing was predicted to hit the nonresidential construction industry with immediate large-scale job losses.
  • A report by Freedonia Group revealed that much of the commercial building space devoted to offices and corporate suites now lies empty due to remote working.
  • The report further questions the ability of the workers in those spaces returning to reoccupy the work spce.
  • According to Freedonia, the empty spaces will likely be converted to apartments and condominiums or be taken over by players from other industries, making permanent the loss of the space and employment opportunity.
Loss of jobs

3. Loss in Productivity/Profit

  • A study by “New Horizons Foundation, the research arm of the Sheet Metal & Air Conditioning Contractors’ National Association (SMACNA),” revealed that COVID-19 protocols led to a 7% loss in profit on commercial construction projects.
  • The report showed that taking precautions and performing fit-for-duty checks before contractors enter a job site resulted in an 8.7% productivity loss.
  • On-job protocols, such as using personal protective equipment (PPE), maintaining social distance from other workers, and making sure workspaces and tools are cleaned and disinfected, led to another 9.2% productivity decline.
  • It also found that an average worker lost 85 minutes dealing with COVID-19 protocols over an eight-hour day.
  • New Horizons Foundation claimed that a 10% productivity loss for specialty contractors could lead to a 100% loss in job profitability.
  • This loss takes about three to six months to become evident in a company’s financial results keeping many contractors in the dark about how much money they are losing to COVID-19.

Commercial Building Construction in the US: Trends

1. Growth in Subcontractors’ Availability

2. Shortage of Skilled Labor

  • According to Contract ERP, Camm Construction, Insulation Outlook, and Contractor Magazine, the shortage of skilled labor is one of the commercial building construction space trends.
  • Contract ERP opined that the workforce shortage is one of the biggest concerns for the construction industry in 2019. Many employees were said to have left the industry during the recession and never returned, leaving the construction companies short-handed.
  • A survey by the Associated General Contractors of America revealed that about 80% of construction companies have been unable to find the workers they need. The impact includes high cost, outsourcing, and longer project timelines.
  • The 2019 USG Corporation and the US Chamber of Commerce Commercial Construction Index (Index) indicate that labor shortage is causing firms to “ask skilled workers to do more work (81%), struggle to meet deadlines (70%), increase costs for new work (63%), and reject new projects (40%).”
  • Although the recession was a leading cause of the worker shortage, experts believe that it has been difficult for construction companies to appeal to younger, talented workers.
  • A slowdown in immigration has also contributed to this issue, with reports finding that many workers returned to Mexico and other countries of origin during the recession and did not return to the US because of increased immigration controls and increased job opportunities abroad.

Commercial Building Construction: Recent News

1. Growth in the US commercial building construction market (Cision PRNewswire, September 04, 2020)

  • According to an Industry report by Cision PRNewswire, the commercial building construction market is expected to grow by a CAGR of 10.2% over the forecast period from 2015-2024.
  • Growth across commercial building construction in the United States, especially office, retail, and entertainment, is expected to record negative growth.
  • This will be driven by the economic downturn triggered due to the COVID-19 outbreak.

2. Construction Starts Show Additional Gains in June (Dodge Data & Analytics, July 16, 2020)

3. How Could COVID-19 Change Commercial Building Design? (Cowen Construction, May 20, 2020)

  • Many experts predict changes to commercial building design and construction meant to keep building occupants safer in light of COVID-19.
  • Such changes include modification in HVAC systems, fewer touchpoints in newer commercial buildings, fewer open work environments, and fewer office buildings.

4. After a brief uptick, commercial construction backlog falls again (Construction Dive, October 14, 2020)

5. Construction Industry Continues To Feel Impact of the COVID-19 Pandemic (Cision PRWeb, October 15, 2020)

  • The company announced the Third Quarter 2020 Turner Building Cost Index, which measures costs in the non-residential building construction market.
  • The value was reduced to 1171, representing a (-0.51%) quarterly reduction from the Second Quarter 2020.

6. Commercial Building Construction Industry Report (IBISWorld, August 14, 2020)

  • The report revealed that the commercial construction industry revenue has experienced a significant reduction in revenue due to a reduction in business activity in early 2020.
  • Since the start of the COVID-19 (coronavirus) pandemic in 2020, the industry revenue fell by 17.4% as construction markets roiled.

7. Warehouses Undergird Commercial Building Starts (Forconstructionpros.com, April 10, 2020)

  • Dodge forecasts the square footage of parking garage starts this year falling 29%, and office starts dropping 13%, retail space down 33%, and hotels and motels down 31%.
  • Their biggest commercial building sector, warehouses, however, is only expected to slip 1%.

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