September 26, 2023

Telefonatbns

Making a New Home

The 13 construction sectors contractors expect to shrink in 2021

3 min read

Dive Brief:

  • Contractors expect 13 of 16 construction categories to shrink in 2021, with only alternative healthcare facilities, warehouses and water and sewer facilities eking out small gains.
  • They also don’t anticipate the business environment to return to pre-pandemic levels at least until the second half of the year, according to the Associated General Contractors of America’s 2021 Construction Hiring and Business Outlook.
  • On a webinar covering the results of the survey last week, which canvassed 1,300 construction firms in November and December, contractors lamented the difficulty of finding new projects and the challenges of keeping the ones they already have on track due to COVID-19 mitigation and productivity losses.

Dive Insight:

The results of AGC’s survey underscored how much work remains before contractors will see any return to “normal” in construction. 

“2021 looks to be a difficult year for many construction firms,” said Stephen SandherrAGC’s CEO, during the webinar. “The pandemic is prompting many projects to be postponed or canceled, forcing contractors to take longer to build projects and increasing the cost of construction.”

Contractors on the call noted the challenges they had in 2020, and the increased struggles they see ahead in 2021.

Michael Kennedy, CEO of St. Louis, Missouri-based design-build contractor KAI Enterprises, said that while existing bond programs had allowed his firm to continue to land jobs, he expected 2021 to display a stark delineation among contractors. 

“We’re going to see the haves and have-nots,” Kennedy said. “Are you on those big jobs? Are they already pregnant and moving? That’s the haves. The have-nots are the people who are still waiting for some developer to close on something, and unsure about the job.”

Bob Schafer, president of West Palm Beach, Fla.-based road builder Ranger Construction Industries, said that even though unemployment in many sectors is high, he still has challenges hiring killed workers in Florida, where much of his business remained on track throughout 2020 as people from the Northeast flocked to the state.

“Someone suggested to me that now that all these people now are unemployed, I should have no problem finding folks,” Schafer said. “But you can’t put a bartender or a waitress on a motor grader.”

He also noted increased costs on the materials side, including steel, cement, liquid asphalt and aggregates.

Rosana Privitera Biondo, president of Kansas City, Missouri-based Mark One Electric Company, said the unanticipated cost of dealing with COVID-19 had significantly impacted contractors’ bottom lines.

“I might have 40 or 50 different general contractors who have a different protocol and requirement,” Biondo said. “We’ve spent a fortune on that, and it’s money that we’ll never see again, that comes right out of the bottom line. You’re talking about hundreds of thousands of dollars.”

Ken Simonson, chief economist for AGC, said the net reading of most construction categories — the percentage of contractors who expected the dollar value of projects to shrink versus expand — was overwhelmingly negative.

Simonson said that 44% of firms reported they had projects canceled in 2020 that had not been rescheduled, and that companies anticipate a continued bloodletting in 2021.

“Even for this first half of 2021, 18% of firms report that projects scheduled to start between January and June have been delayed, and 8% report projects scheduled to start in the first half of this year have been canceled,” Simonson said. “As a result, few firms expect the industry will recover to pre-pandemic levels any time soon.”

At the same time, while the tone of the call was starkly pessimistic, Biondo and others said they would get through 2021 by streamlining operations, cutting costs to conserve cash and finding jobs wherever they can.

“We’re going to have a challenging year,” Biondo told participants. “But I’m a contractor who’s been in business a long time, and you can find work. It’s your job to find work. It’s my job to make sure I work my team. So we dig in deep.”

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