The COVID 19 pandemic has wreaked havoc on many industries in the past year, but the effects on construction have been more of a mixed bag. Several factors have both helped and hindered the construction industry as a whole from 2020 to 2021. In this article we’ll take a look at how industry norms have been affected by supply chains, demand, and worker shortages. We’ll also follow these trends to forecast the future of both residential and commercial construction for the immediate future as well as the next 5 and 10 year periods.
Current Trends in Construction and a Look at the Immediate Future
In 2020 the housing market saw a temporary freeze due to an uncertain economy in the early days of the global pandemic. However, as things began to stabilize at the start of 2021 the housing market (especially in the suburbs) began to boom. White collar workers were quick to take advantage of the shift to remote work, and low interest rates to get out of rentals in the city and buy homes in the suburbs. There is a demand for new housing, as the existing structures can’t keep up with the demand for single family homes. However because of an unprecedented run on materials, the output has so far been unable to keep up with the demand.
Supply chains have been interrupted all over the world, and lumber is no exception. Building supplies continue to be in high demand, and the price of lumber soars above all else, increasing by 250% since April of 2020. While builder confidence in market trends remains high, supply has been unable to keep up with demand due to shortages in all building materials. Other factors that showed a negative impact on the industry included labor shortages and heightened sanitation standards (due to COVID regulations), slowing work in many areas. Quality labor remains expensive and competitive, although robotics pick up some of the slack.
Commercial building took a hard hit in 2020, dropping 23% in the economic uncertainties of the pandemic. However, the pandemic merely exacerbated pre-existing construction trends. The rise of e-commerce has already slowed the growth of commercial retail spaces like shopping centers. However, as the economy continues to recover, developers are optimistic that construction will continue to grow as they move away from densely populated offices and retail centers, and more toward the construction of large manufacturing, data, and distribution centers to help alleviate supply chain problems.
The immediate future of both residential and commercial construction are trending toward a slow recovery. As supply chains begin to rebuild (helped in part by commercial building), prices on materials should begin to stabilize. Uncertainties caused by the pandemic continue to contaminate the industry, but demand for both residential and commercial space is expected to remain robust for the next year.
Trends in Construction for the Next 5 Years
Looking forward into the next five years, the construction industry is anticipated to show slow growth as the government focuses on infrastructure in the United States. Output is trending to show a 1.1 percent growth over the next several years as the government invests in projects that include roads, ports, and bridges, as well as telecommunications, water, and sewer. While the construction of new retail sites and office buildings remain an uncertain factor, data centers and manufacturing plants are a continued need moving forward. These other projects should provide ample jobs for the industry, especially with a nationwide emphasis on infrastructure.
Economic uncertainty is still a factor, but as national vaccination numbers trend up, more and more consumers are entering the marketplace full force. The gap between supply and demand will continue to decrease and allow for contractors and construction companies to take on more jobs. As stability rises, the labor force should continue to rise along with it.
Trends and Projections for the Next 10 Years
Barring any unexpected economic downturns or disruptions, the construction industry should continue to see slow growth and continued stabilization due to the healing of supply chains. Demand for the housing market is expected to remain fairly high in continuing years as Millenials have entered the marketplace.
Driven by the claustrophobia and restrictions of the pandemic, many of the Millenials who have been previously satisfied with rentals and city living are beginning to aspire toward larger living spaces and lawns or gardens. The restructuring of many office environments to include telework have made this exodus to the suburbs possible for consumers. While housing prices are projected to remain high, the desirability of living space and comparative cost of city living continues to drive the market. New home building will not remain a constant boom, demand should stay steady and stable supply chains should bring prices of building materials to a more accessible level.
Construction in the commercial sector is projected to continue to include more opportunity in the manufacturing and infrastructure branches. This will call for large-scale projects that include a need for labor and materials. While the types of structures needed may fluctuate, the demand for new building should stay on course. Trends show an increase in tech, using drones, 3D printers, and even biomaterials in the future of construction projects. This may change how laborers train for the job and even some restructuring within existing labor structures.
A look at the occupation itself reveals that employment of construction workers is projected to grow 5% through 2029. While robotics have taken some of the labor jobs, more educated workers are needed to interpret data and manage the new technology.
Takeaways from the Data
While no one can tell the future, especially in the aftermath of a global pandemic and subsequent economic upheavals, we do know that the construction industry is dependent on one thing: capital. After a major disruption in 2020, industry growth will be slow, but is projected to remain steady. As the economic uncertainties of the past year begin to stabilize, and as the government takes a strong stance on building national infrastructure, the construction industry is a necessary driving force to build the future.