Commercial demolition contractors and the real estate development industry have all had to adjust to the ever-shifting landscape of a world in a pandemic. Though the industries have proven resilient so far, innovation is required to not just survive but prosper in 2021. Here we share some predictions about these industries in 2021.
Short-Term Impacts of the Coronavirus Pandemic to the C&D Industry
The success of commercial demolition contractors and land developers this year has much to do with their states’ responses to ever-changing COVID-19 requirements.
Impact on Industrial Recycling
Many recyclers have reported a drop of tonnages, down 50% to 80% year-over-year. In response to a concern over payments slowing down, some recyclers have been easing their policies against the use of credit cards for payment.
Construction projects have started up again, which has increased the flow of materials to recycling plants. However, many projects have been canceled or delayed. This has left construction, demolition, and recycling contractors uncertain about stability in the short term.
Impact on Construction Contractors
One important statistic that shows the impact of the coronavirus pandemic on construction contractors is the year-to-date changes in quarterly actual spending data. The first quarter year-to-date growth was “forecast at 7%” but actual spend was at “9.5%”. The second quarter was where things dramatically changed, with actual spending increasing by 1% year to date.
Nearly all the changes are due to projects being delayed or shut down. These are the projects that had been planned but canceled or pushed to 2021 and beyond. These delays and cancelations have rippled down the chain of construction to the recyclers and demolition industries.
Construction on nonresidential buildings fell on average 20% across the United States, with warehouse construction being the only kind of construction that is actually seeing positive numbers. Non-building project starts (such as infrastructure, bridges and roads) saw a drop of an average of 15%, with highways and bridges being the only non-building type to see an increase in starts. Residential project starts did fall as dramatically, with only a 5% to 10% drop in construction predicted for the year.
Long Term Impacts on Oregon Industrial & Commercial Demolition Contractors
The initial slowdown will not only affect 2020, but will ripple into 2021. This is because only about 20% of a new project’s budget is spent in the year they start, with 50% getting spent in the year following. This means that not only are industrial construction contractors missing out on income this year, but also next year due to projects getting canceled or delayed.
What actually drives construction job demand is a measurement called “construction volume”. This is derived from spending minus inflation, as inflation does not support job growth. Peak volume occurred in 2017 and 2018, with volume being forecasted to decline every year until 2023. The construction industry did add some jobs in September 2020 but jobs are down 5% from peak hiring in February.
This will also translate to a heavier future backlog of projects as many projects start again after being delayed by the pandemic. Growth has been predicted to slow in 2021 by 1.2% year over year and only see a mild recovery of about 0.1% in 2022.
The 20% decline in project starts in 2020 is predicted to translate to a huge decline in spending and jobs in 2021 through 2022. The American Institute of Architects recently published its forecast on the construction industry, saying that nonresidential construction is forecasted to decline in 2021 due to the pandemic. “As a result of the partial shutdown economy, businesses and organizations will continue to be hesitant to invest in modernized or new facilities.” This will also mean the end of a decade-long expansion in construction spending.
The commercial building sector is predicted to be the hardest hit, with a projected decline of 12% this year and a continued drop in 2021 by as much as 8.4%. The only area of growth in the industrial construction industry is for hospitals and public safety projects, which is projected to grow 15.6% this year.
Commercial Demolition Company Serving Oregon, Washington, Montana & Idaho
Demand for steel is expected to rise by the World Steel Association. Potentially, we could see year over year growth of 3.8%. The construction sector’s steel demand is thought to remain relatively stable.
2021 looks like it is shaping up to be another year of change. Supply chains that were disrupted in 2020 due to the coronavirus must be rethought and adjusted. Worker safety, and labor shortages due to lockdowns will continue to affect the demolition and construction industry through the year. However, unlike 2020, all signs are pointing to a slow, gradual recovery as countries open up. It is unknown what the effect the development of a vaccine will bring, or what new opportunities will appear in the midst of the pandemic.
As delayed projects get their start in the new year, this should help the recovery of the construction, demolition, and recycling industries. The new projects should infuse each of the industries with needed money and create new demands for their services. Government spending may also play a bigger role, depending on the terms of any future stimulus packages. The focus of these industries should be on adjusting to accommodate the safety measures put into place by the CDC in order to resume work as quickly as possible.
Elder Demolition stands by to help meet your demolition service needs. We have the expertise and equipment to bring down any building in a cost-effective, efficient, and safe manner. Our demolition expertise is known throughout the Northwest and surrounding areas, from Spokane, Washington to Montana, Idaho, and Portland, Oregon. Contact us today.