CONSTRUCTION
A State-of-the-Industry Report : Construction to Recover in 2021
Market strength will improve with a COVID‐19 vaccine and more federal stimulus .
By Diane C . Walsh Contributing Editor
The COVID‐19 pandemic and the recession it unleashed dealt a harsh blow to the construction industry , resulting in an estimated 14 percent loss in 2020 , according to a study by Dodge Data & Analytics , which projects only 4 percent will be regained in 2021 .
Dodge Data & Analytics released the findings at its 82nd Annual Construction Outlook event , after studying more than 500,000 construction projects involving 1.5 million companies . Dodge is considered North America ’ s leading provider of analytics in an industry it has been studying for more than 120 years .
CEO Dan McCarthy told the participants in the virtual event that if ever there was a need for guidance it is now because of the “ stark and inexact ” impact of the COVID‐19 crisis .
Cris deRitis , deputy chief economist for Moody ’ s Analytics , and Richard Branch , chief economist for Dodge , outlined market conditions and explained how they are affected by business and consumer reactions to the virus , interest rates , a federal stimulus package and the job market .
“ While recovery is underway , the road to full recovery will be long and fraught with potential potholes . After losing an estimated 14 percent in 2020 to $ 738 billion , total construction starts will regain just 4 percent in 2021 ,” said Branch .
“ Uncertainty surrounding the next wave of COVID‐19 infections in the fall and winter and delayed fiscal stimulus will lead to a slow and jagged recovery in 2021 . Business and consumer confidence will improve over the year as further stimulus comes in early 2021 and a vaccine is approved and becomes more widely distributed , but construction markets have been deeply scarred and will take considerable time to fully recover .”
The outlook delved into each construction sector including :
Amazon controls 16 percent to 18 percent of the total market share in warehouses and is breaking records .
Commercial . Overall , the dollar value of commercial building starts will increase 5 percent in 2021 . Warehouse construction will lead the surge as e-commerce giants continue to expand their logistics infrastructure . Branch emphasized Amazon controls 16 percent to 18 percent of the total market share in warehouses and is breaking records . In 2019 , Amazon enjoyed 25 percent growth . Even though it slowed to 2 percent in 2020 , Amazon is still expected to climb 8 percent in 2021 .
Cris deRitis said office and retail will continue to struggle as evidenced by the bankruptcies . While he is not declaring “ the death of cities and offices ,” the Moody ’ s economist said there will be evolution and transition as the population is drawn to different locales with the flexibility of working from home . He also said there is a “ potential for an entrepreneurship revival as shown by the record number of new business applications across the nation .”
The dollar value of manufacturing plant construction will remain flat in 2021 . Declining petrochemical construction and weak domestic and global activity will dampen starts , while a small handful of expected project groundbreakings will level out the year . Electric utilities / gas plants will gain 35 percent in 2021 , led by expected groundbreakings for several large LNG export facilities and an increasing number of wind farms .
Residential . The dollar value of single-family housing starts will be up 7 percent in 2021 and the number of units will grow 6 percent to 928,000 . The upturn is fueled by the historically low mortgage rates and the buyers ’ preference for more open space since the pandemic . In a nationwide analysis , Dodge found Arizona is experiencing the fastest growth in house prices and West Virginia has the slowest .
Multi-family construction cannot claim the same upturn , however . The big inventory of high-end construction in many large metropolitan areas , combined with declining rents will lead
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U . S . construction starts will increase 4 percent in 2021 , to $ 771 billion . 18 COMMERCE www . commercemagnj . com
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Getty Images / iStockphoto