The COVID-19 pandemic isn’t just shutting people’s doors as homeowners hunker down. It is also significantly affecting almost all industries.
The construction market isn’t spared. The question is, how bad is the damage? What future awaits for contractors and their workers?
Construction Industry Contracts
Currently, the consensus of experts is that the construction industry is set to contract. According to ResearchAndMarkets.com, it might have declined by as much as 6.5% in 2020 as the overall economic activity slid by around 8%.
IBISWorld’s analysis also shared similar sentiments. The construction revenue might have dropped by 6.3% last year.
The experts see many factors that may be affecting both the demand and market value of construction:
- At the height of the COVID-19 pandemic, many states ordered business orders, which impacted construction companies directly and indirectly. They are not the only ones that have to stop working temporarily. So do their customers.
- Proposals in the bidding or the final stages may still be on hold, canceled, or delayed. It could be because the office has fewer workers to attend to the matter, there’s uncertainty in the market, and others fear the risk of the virus spreading in construction sites due to lack of social distancing.
- Health protocols could also affect the industry. Some rules require only a certain percentage of workers to be present on-site, resulting in a labor shortage. Moreover, businesses need to spend more on essentials, such as masks, which can also hinder the team’s performance.
There’s a Light at the End of the Tunnel
Despite the decline of construction activity, contractors and employees need not lose hope. It seems it remains to be one of the major contributors to the economy. Moreover, like everything else essential, it will recover post-COVID.
ResearchAndMarkets.com shared that between 2022 and 2024, the industry will start to rebound. During the forecast period, it will post an annual average growth rate of at least 1.1%. On the other hand, the Federal Research projects that the gross domestic product (GDP) will grow by 4.2% in 2021.
Cumming’s report suggested that residential construction demand will be high in key cities, such as Dallas, San Francisco, Los Angeles, and Miami. In places like Texas, Colorado, and Georgia, a population increase will boost the need for more homes.
The state of Colorado alone ranked fourth in terms of population increase percentage between 2018 and 2019. During this period, it added over 65,000 more people. It also placed eight with the highest birth rates within the same years.
In 2019, Denver added the most number of people among the counties. By July 1, over 700,000 people called the city their home.
How Construction Industry Can Prepare for the Highs and Lows
The construction industry won’t die based on the data, but it will still be an uphill climb post-COVID. How can contractors prepare for the highs and lows? Here are three ideas:
1. Expand Services and Products
Contractors can consider adding more services and products, so they can also expand their clientele or serve other niches. Take, for example, hydraulic repair and replacement.
Hydraulic systems are actually a staple in many industries, including construction, plumbing, mining, and even residential. Contractors can buy a hydraulic hose franchise, so they don’t have to start from scratch. They can take advantage of franchise expertise and marketing support, among others.
For idle assets, contractors can either sell or lease them. Doing either can (or both) boost their cash flow, which they can then use as extra working capital or reserves.
2. Focus on Growing Markets
Contractors may also need to pay attention to the growing markets within the next one to two years. Besides residential, there’s also a high demand for schools and healthcare facilities as the population increases.
With commercial, construction business owners should be on the lookout for refitting or repurposing of spaces. The lessons of the pandemic may mean that full-fledged offices may accommodate fewer employees or opt for modular or convertible spaces. There may also be an increasing need for HVAC for better ventilation systems.
3. Tackle What’s In Front
While the construction industry can prep for the future, they can also likely thrive if they learn to tackle the challenges at present:
- Stabilize the supply chain
- Manage operating costs
- Consider projecting per project
- Source government support
- Improve employee safety
Some scientists believe that, despite the vaccines, COVID-19 will likely become endemic—that is, it will stay for a much longer period. It may achieve the same status as the flu. Rather than wait when it is over, those in the construction industry can live with it and take steps to recover more quickly.