One Year Later: Lessons and Reflections
by Evan Hill | April 12, 2021
The pandemic burst on the scene one year ago, impacting the construction industry—and the world. Now, we’re looking back at how construction has changed and grown to ensure continued project and program success. Many in the industry have endured dramatic changes while facing uncertainty around demand, revenue expectations, and supply of materials.
“Fifteen percent (of contractors) thought that they were going to reduce the number of workers they have. I think that’s an important point. Only a very small share of the industry ever expected to significantly reduce their workforce.”
- Laquidara-Carr, Dodge Data & Analytics
Industry Impacts: Commercial Contractors
As data emerges from 2020, it paints an interesting picture of uncertainty and recovery. “Commercial contractors’ confidence levels in the market started strong in Q1, but took a sharp dive in Q2,” reports Donna Laquidara-Carr of Dodge Data & Analytics. “I think contractors were really panicked, but then by Q3 they were starting to be more optimistic.”
The survey results showed a similar drop-off in Q2 in expected revenue, followed by a recovery of optimism in Q3 and Q4 of 2020. “Again, we see more stabilization in the market and less concern about big declines,” says Laquidara-Carr. “The responses around expected profit margins followed a similar trajectory.”
Most of the contractors reported that they were expecting to keep the same number of people on board. “Fifteen percent thought that they were going to reduce the number of workers they have,” Laquidara-Carr says. “I think that’s an important point. Only a very small share of the industry ever expected to significantly reduce their workforce.”
The pandemic’s impact on projects is widespread, with a third of respondents saying ¼ or more of their projects have been affected or delayed. The data reveals that 70 percent of contractors were experiencing materials shortages in Q4 of 2020—and still were in Q1 of 2021.
Industry Impacts: Civil Contractors
Another survey questioned civil contractors about their expectations and experiences in 2020. While expected revenue levels stayed the same, the expected profit margin grew for a significant number of respondents. “A lot of them said they felt they could bid on more profitable jobs,” says Laquidara-Carr. “I think that is why they are more optimistic about profit margins.”
Civil contractors are also having a difficult time finding skilled workers. Their expectation about the cost of labor rose dramatically between Q2 and Q4—66 percent believe skilled workers are going to cost much more than they did previously. “There’s some concern that the scarcity of skilled workers is going to be an issue,” says Laquidara-Carr.
After a 22 percent decline in 2020, economists forecast a 3 percent increase in non-residential construction in 2021. “This industry was hit hard, but when we look at 2021, we believe things we’ll see some significant movement toward recovery.” Warehouse construction is one of the biggest growth areas, with some mild gains in office and healthcare construction.
Shift Toward Remote Work and Digitization
Despite the challenges of 2020, many companies found silver linings. The urgency of lockdowns prompted many organizations to adopt technology more quickly than they would have otherwise. Many construction professionals who have been able to shift to a remote or hybrid work style are eager to retain the flexibility it brings. In fact, survey data shows that out of 70 percent of contractors who say their teams are working remotely, half of those thought there would continue to be a lot of remote work in the future. “There’s historically been a high level of resistance to remote work in the construction industry, so these numbers are a huge shift,” says Laquidara-Carr. The expanding use of digital tools, such as construction management software, has fostered another profound change in the industry. “Normalizing digital collaboration makes a huge difference and will have long-term impacts in the industry, beyond just making our lives a little easier,” Laquidara-Carr says. “I think it will improve our projects in the long run.”
Key Topics Covered: New normal in Construction, webinar