2021 Outlook Muted as Pandemic Delays, Cancels Projects

Most contractors expect construction demand to shrink in 2021 as the pandemic prompts many owners to delay or cancel planned projects, which means few firms will hire new workers, according to survey results released by the Associated General Contractors of America and Sage Construction and Real Estate. The new AGC Construction Outlook is based on survey results from more than 1,300 member-contractors from all 50 states and the District of Columbia.

Only one-third of the contractors surveyed say their business is back to its year-earlier level. Another 12% believe it will bounce back within the next six months, but 55% of companies say it will take more than six months—if ever— for business to get back to the year-earlier volume.

“This is clearly going to be a difficult year for the construction industry,” said Stephen Sandherr, the association’s chief executive officer. “Demand looks likely to continue shrinking, projects are getting delayed or canceled, productivity is declining, and few firms plan to expand their headcount.”

Moreover, 59% of contractor-respondents reported they had projects scheduled to start in 2020 that have been postponed until 2021. And 54% said they had projects canceled in 2020 that have not been rescheduled.

“The net reading for the percentage of respondents who expect the available dollar value of projects to shrink compared to the percentage who expect it to expand is negative in 13 of the 16 categories included in the survey,” says Ken Simonson, AGC chief economist. “Contractors are most pessimistic about the market for retail instruction, which has a net reading of negative 64%.”

A negative reading means the percentage of respondents who expect a market segment to contract exceeds the percentage who expect it to expand by that percentage.

Hiring Outlook
Only 35% of the contractors surveyed said they plan to add staff this year; 24% said they plan to decrease their headcount in 2021 and 41% expect to make no changes in staff size.

Hope for Help From Washington
Sandherr said the group will push Congress and the incoming Biden administration to enact legislation providing funds to support state and local governments’ construction budgets.

Sandherr also said AGC will seek to educate the incoming Congress and administration about the risk of imposing “some new regulatory measures while the economy remains crippled by the pandemic.”

IT Forecasts
Dustin Anderson, vice president and general manager of construction technology provider Sage said 62% of contractors indicated that they currently have a formal IT plan that supports their business objectives, up from 48% last year.

An additional 17% of contractors plan to create a formal process plan this year. Most firms plan to keep their technology investment at about the same level as last year.

Moreover, 55% are using mobile technologies for sharing drawings, photos and documents; 44% say it’s difficult to find time to train staff for new technology. Among the respondents, 43% listed employee resistance as a top challenge, up from 38% last year.

Source: ENR