Construction activity in 2020 expected to drop steeply

Commercial construction starts are expected to fall by 16% in 2020, with retail starts projected to be down by 33% and hotel/motel starts by 31%.

That’s the grim outlook that Richard Branch, chief economist for Dodge Data & Analytics, foresees that reflects the current and potential impact of the coronavirus on North America’s construction industry.

Also see: The American department story was already in trouble. Then the virus hit.

“We are in recession. Full stop. No question about it,” asserts Branch. His forecast takes into account epidemiological assumptions that infections will peak in May and begin to subside in July. “What’s next is [figuring] out the depth of this recession and what a potential recovery looks like.”

[Construction forecast] Economic conditions blamed for project delays

A Dodge poll of 172 contractors across the country, conducted from March 19-31, found that close to two-thirds of respondents were worried about recession. Sixty-seven percent of contractors said they were experiencing project delays, and of that total, 38% blamed “worsening economic conditions.” Almost half (47%) expected their businesses to be “highly impacted” by the virus’s spread within the next three months, including the fear among 55% of contractor respondents that their workers might be more susceptible to COVID-19 infection.

Richard Branch, Dodge Data & Analytics' chief economist, says construction is already in a recession. Image: Dodge Data & Analytics

Also see: Construction employment declines in 20 states and DC in March

A silver lining to this health crisis could be pent-up demand. Dodge, which tracks construction work around the country, estimates that more than 200,000 projects were in preplanning or planning stages as of March 30. But fewer than 17,000 public projects were actively bidding as of April 2.

[Construction forecast] Homebuilding also looks precarious

Dodge Data & Analytics also projects that residential construction would be off by 13% this year, which augurs bad news for the rest of 2020, considering the Census Bureau’s preliminary estimate for March housing starts, which at a seasonally adjusted annual rate of 1.216 million units was down only 1.4% from the same month in 2019.

Also see: Multifamily market flattens as construction proposal activity sinks

The outbreak of COVID-19 represents an unprecedented test for the global healthcare system. Managing the pandemic—and saving lives—depends largely on the availability of medical supplies, including the capacity of hospitals. But the United States lags behind other nations, with only 2.8 beds per thousand people compared to 4.3 in China and 12.8 in South Korea.