Construction Sector Faces Ongoing Challenges Through 2021
With COVID-19 evolving from an issue that portended disruption for Chinese supply chains to the most serious public health crisis the U.S. has seen in decades, the first half of 2020 brought “a torrent of unexpected challenges” for the construction industry, JLL’s Henry D’Esposito notes in the firm’s newly issued Construction Outlook for the year’s second half and beyond.
The most disruptive of these included construction shutdown orders, new procedures to enable physical distancing on job sites and delays of materials, fixtures and equipment.
Looking ahead, D’Esposito sees a mix of negative, positive and mixed in the forecast. On the negative side, the forecast says, “COVID-19 will continue to challenge construction operations for the rest of 2020, and the risk of renewed shutdowns remains possible.”
Further, “cutbacks in state and local budgets will create a major risk for construction because public spending was the primary growth driver over the past two years.” Accordingly, JLL is predicting a decline of 10% to 15% in nonresidential construction for this year.
In terms of mixed forecasts, JLL’s report predicts that construction confidence will remain negative through the end of the year, “and the difference in sentiment between sectors will be even wider than it was pre-pandemic.” The upcoming 2020 election creates “political risk and uncertainty,” writes D’Esposito, with the potential for both positive and negative outcomes for construction regardless of which party wins.
On the positive side, D’Esposito notes that long-term construction sentiment is positive for the first time since 2014, “and optimism for growth in 2022– 2025 will remain much higher than it was before the coronavirus recession.” It may seem counterintuitive for sentiment to turn positive now, with the long-expected other shoe dropping in the form of a deep recession, but D’Esposito notes, “There is a strong consensus across construction firms that this will be behind us in the next two to three years and that the industry will return to growth.”
Another positive forecast is an outcome of the working conditions that the pandemic forced upon the construction sector: technology acceleration due to the pandemic will lead to “a permanent and industry-wide increase in the adoption of construction tech.” The report notes that over the past few months, “an already burgeoning construction tech industry saw a jump in immediate demand.”
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- ◦Economy
- ◦Development
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