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Construction Industry Experiencing Short-term Challenges, Long-term Outlook Remains Bright

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When February began the construction industry in the U.S. was booming. Commercial and residential projects were on the rise. Infrastructure was a priority for many states throughout the country.

Of course, the trends in construction have been significantly impacted by the arrival of COVID-19. Many projects that had been greenlighted, but not started, have stalled virtually overnight. Existing projects have been delayed or at least slowed because of the need for social distancing, and the difficulty to procure raw materials around the world.

The federal government however has deemed construction an essential industry. One of the reasons is that construction can help protect its residents, particularly those in low-income situations, survive. Shelter is as critical, and can be as challenging to these Americans as food and water. For example construction projects are continuing at well over 300 projects defined as “affordable housing” throughout New York City.

The Bureau of Labor Statistics reported that although the number of construction jobs fell in March, residential construction added 2,000 jobs. At this time however, residential construction projects may face more significant challenges, including funding. Lenders are already showing signs of being hesitant to move forward with many such projects.

Early data also suggests that a growing number of residential construction workers are pulling back, worried about catching the coronavirus. CNBC reported that in a recent homebuilder survey, 64 percent of respondents indicated issues with the willingness of workers to report to a construction site because of the virus. This number jumped from 42 percent a week earlier.

On the commercial side, a number of new projects where ground has not been broken seem to be on hold. Yet this varies from state to state. In California, one of the very first states to issue strong stay at home guidelines, Gov. Gavin Newsom has labeled “essential critical infrastructure workers” as professionals who “support the construction, operation, inspection, and maintenance of construction sites and construction projects, including housing construction.”

Meanwhile construction in Boston has been put on an indefinite moratorium and only emergency repairs are being allowed throughout Pennsylvania. However construction on Amazon’s H2 headquarters in Virginia remains on schedule. Additionally some developers in large metro areas like Philadelphia, where construction has been booming for a number of years, predict that the economic downturn caused by COVID-19 might have less of an impact than the Great Recession did in 2008-2009.

One thing is certain, safety and quality control will remain critical. With fewer workers willing to come to a job site, construction failures or accidents caused by human mistakes will need to be mitigated. There are liability and OSHA issues to consider when it comes to the health and safety of construction workers as well. Unlike the flu and common cold, COVID-19 has been defined as a recordable illness by OSHA if a worker is infected as a result of performing their work-related duties. COVID-19 is not exempt from the recording of on-the-job incidents, while common colds and flu are exempt.

I do believe though that construction is one industry that will help lead an economic recovery. The long-term outlook for the industry remains bright. Pent-up demand for construction projects is likely, as progress is made in combatting the coronavirus. There will also be pent-up demand for the roughly 7 million construction workers, not to mention other skilled trade professionals in the U.S., to earn regular paychecks again. Projects that were paused and have already been funded will likely begin as quickly as possible.

It is also possible that infrastructure needs in the U.S. could support the economy from a macro perspective. Infrastructure projects often create economic growth. There may be no choice but to remove some of the inefficiencies that can cause delays on these projects as a way to help reignite the economy.

To those construction professionals who are providing healthcare organizations and federal and state authorities with the necessary and critical construction needs, thank you! Our teams are here to help any way we can, working to ensure your vital projects are covered.

Stay safe and healthy.

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