Examining the Implications of COVID-19 for the Construction Industry

Like much of the nation’s economy, the construction industry has been altered by the COVID-19 outbreak and many expect to see impacts that last beyond the peak of the virus. According to a recent independent poll of industry experts and partners, the construction industry expects a loss of subcontractors, labor and material shortages, increased safety measures, and cost increases based on supply.

Due to constraints for essential work, many projects at a variety of phases were paused at the beginning of the COVID-19 outbreak, but the industry expects these to resume in late 2020/early 2021. Forty-three states have deemed construction efforts and building material suppliers to be essential, allowing projects to either continue or begin depending on the project timeline. Many organizations and companies have a capital budget they will need to spend by the end of their Fiscal Year. It is fair to assume that many construction projects will ramp up during the third quarter of the year to accommodate that spend.

Long-term labor shortages are a possible result of COVID-19. Labor shortages, in turn, will have the potential to impact project budgets and schedules.

Updates occurring in the form of new or additional safety and sanitization measures related to social distancing and sanitization requirements may modify the way the industry operates and conducts business. When states can resume work, these efforts will require construction assistance to build and design. This has the potential to create additional work for the industry. While these efforts are important, OSHA reports that the risk of transmission for those employed outside the healthcare sector is low.

Material shortages are impacting builders and construction teams that source from overseas suppliers. Short-term COVID-19 disruptions could include clients and designers considering material substitutions should deliveries of materials and equipment to keep project timelines moving forward.

Due to suppliers’ decreased revenue, the price of materials could decrease in the short term; however, the market may quickly become tight due to supply constraints, ultimately increasing the cost of materials and projects.  Some supporting factors include:

1. If smaller construction companies cease operations or cut back staff considerably, there may be fewer companies competing to win projects.
2. Contractors may be less likely to travel outside of their typical location, potentially increasing the competition among contractors in nearby geographies. This could help to decrease the costs of projects for clients.
3. Companies willing (and able) to pay skilled workers higher wages may be able to control the pool of qualified workers and therefore win and deliver more projects.

While the construction industry navigates through these times, the future of construction continues to evolve as companies look to bring their customers the best technology and customer service while improving efficiencies. Just as the industry overcame and adapted to prior major disruptions like 9/11 and the 2008-2009 financial crisis, it is reasonable to remain positive as we join together to overcome this challenge.  It is likely that we will look back on this time as the point at which many new processes and techniques were developed to improve efficiencies and construction project delivery.

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