State of the Construction Industry: One Year Into the Pandemic

It’s been a little over a year since the World Health Organization declared COVID-19 a pandemic. In the days and weeks that followed, we started to get a feel of how it would impact our lives as states began issuing stay-at-home orders, mandating people shelter in place except for essential work and activities.

This forced many businesses to have to halt operations and many workers started to make the transition to working from home. For the most part, construction activity was deemed essential, although there were a handful of states and cities that categorized it as nonessential in the beginning.

And while construction projects in progress continued, with enhanced safety protocols on jobsites in place, projects in the design and bidding phases were heavily impacted as projects began being delayed or put on hold.

Questions and uncertainty over how long the pandemic would last and what the economic impact would be caused many owners to rethink starting new projects or moving forward on anything not already under construction.

So, where does the construction industry stand one year later? As the rollout of vaccinations continue and states start easing more and more pandemic-related restrictions and things start to reopen, it feels like we are slowly progressing toward whatever our new normal might look like.

Here’s a brief look at what the overall impact COVID-19 had on the construction industry and where it stands today.

Construction Spending

Despite the pandemic, construction spending increased in 2020. Total construction spending last year was $1.43 trillion, a 4.8% increase over total construction spending in 2019. The increase in construction spending last year was due mostly to the almost 12% increase in residential construction put-in-place which totaled $813.9 billion in 2020. Nonresidential construction dropped 0.04% in 2020 with the drops in spending for lodging, office, commercial, manufacturing, educational construction projects.

Construction spending in 2021 has gotten off to a good start as well with the seasonally adjusted annual rate of construction spending totaling $1.52 trillion in January.

It’ll be worth watching to see what impact soaring construction materials prices will have on construction spending moving forward. According to the Producer Price Index, final demand construction is only up 1.0% from a year ago despite some massive price hikes for materials like softwood lumber which is up 79.7% from a year ago.

U.S. Monthly Construction Spending

Construction Starts

Construction starts, on the other hand, have not fared as well as construction put-in-place spending. ConstructConnect’s nonresidential construction starts were $386.6 billion in 2020, down 27% compared to 2019. For February 2021, nonresidential construction starts totaled $18.5 billion, down 34.6% from January 2021’s $28.3 billion and down 38.5% from February 2020’s $30.1 billion.

ConstructConnect’s construction starts compile the total estimated dollar value and square footage of all new project groundbreakings in any given month. They lead, by nine months to as much as two years, put-in-place statistics which record monthly spending on projects in progress as they proceed through completion.

Basically, starts records the total cost of projects the month it starts and put-in-place records what was spent each month. So, in 2020 total nonresidential put-in-place was $813.9 billion versus starts that totaled $386.6 billion.

U.S. Nonresidential Construction Starts

Construction Employment

Despite the strong numbers in construction spending, construction employment took a massive blow shortly after the pandemic hit. The construction industry lost over 1.1 million jobs in March and April 2020. Factors that impacted this include the construction activity being shut down in areas where it was deemed nonessential as well as new and upcoming projects getting delayed or put on hold.

To put that number of jobs lost in context, leading up to and during the Great Recession, the construction industry shed over 2.2 million jobs, but that was over the course of about three years compared to the 1.1 million jobs lost in just two months during the pandemic.

The good news is that construction employment has been steadily increasing since May 2020 and has added back 931,000 of those jobs through March 2021 despite a drop of 56,000 jobs in February 2021 based on preliminary numbers from the U.S. Bureau of Labor Statistics. The construction industry is still down 182,000 since the pandemic struck so it’ll be something to watch to see how quickly those jobs can be added back as recovery from the pandemic continues.

U.S. Monthly Construction Employment

Architectural Billings

Architectural billings have taken a big hit since the pandemic struck. The Architectural Billings Index score from the American Institute of Architects reflects the approximate nine to twelve-month lead time between architecture billings and construction spending. Any score above 50 indicates an increase in billings and any score below 50 indicates a decrease in billings.

In February 2020, the ABI was 53.4 and things were looking good to start off the year. Then the shutdowns and stay-at-home orders started rolling out and the ABI plummeted to 33.3 in March and bottomed out at 29.5 in April 2020.

The ABI score did improve in the following months, but never got above 50, meaning there was no increase in billings in a year. Things might actually be starting to turn around because the ABI score for February 2021 was 53.3, nearly matching the last score before the pandemic was declared.

AIA’s Architecture Billings Index

Coronavirus Outbreaks on Jobsites

With construction practically deemed essential everywhere during the majority of this pandemic, it’s no surprise that we saw a number of outbreaks on construction sites across the country. Many of those reported were on larger jobsites where there could anywhere from a few hundred to a few thousand daily workers.

So, what constitutes an outbreak? The CDC has this recommend definition for declaring an outbreak:

• During (and because of) a case investigation and contact tracing, two or more contacts are identified as having active COVID-19, regardless of their assigned priority, or
• Two or more patients with COVID-19 are discovered to be linked, and the linkage is established outside of a case investigation and contact tracing (e.g., two patients who received a diagnosis of COVID-19 are found to work in the same office, and only one or neither of the them was listed as a contact to the other).

One of the biggest outbreaks of COVID-19 was in Montana on the construction site of the Montage Big Sky luxury resort where at least 116 workers tested positive through July 2020. Suffolk, the general contractor on the project, implemented additional safety measures and guidelines back in March after six subcontractors tested positive while working on the $400 million ski resort.

At the SoFi Stadium construction site in Los Angeles, the new home of the NFL’s L.A. Rams & Chargers, there had been 49 confirmed cases (as of July 21, 2020) of COVID-19 dating back to March when an ironworker was the first to test positive for the coronavirus.

A nuclear power plant under construction in Waynesboro, Georgia became something of a hotbed for COVID-19 cases. At least 75 people at the site had tested positive for the coronavirus by mid-July 2020.

And those are just three examples of dozens of outbreaks reported last year at construction sites.

Construction Technology Adoption

Let’s end it on a positive note today. According to JLL’s State of Construction Tech 2020 report, the construction industry saw accelerated growth and adoption of construction technology in 2020. By their estimates, the rate tech adoption that would normally have taken three year was accomplished in just nine months of 2020.

This makes sense as contractors turn to technology to stay connected with stakeholders, staying productive and efficient with fewer workers, and improve jobsite safety during and, hopefully, after the pandemic.