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4 Long-Term Effects of COVID-19 on Construction

Long Term Covid Effects on Construction

The COVID-19 pandemic sent shockwaves around the world, causing tremendous disruptions, closures, and restrictions. It’s not easy to find an industry that emerged unscathed. Additionally, even though many sectors have started to recover, they’ll frequently deal with long-term impacts. The construction industry is one of them. Here are 4 lasting effects that construction professionals will continue to see.

1. Delayed or Canceled Projects Coupled With Staffing Shortages

As world leaders began implementing lockdowns and restrictions, many construction companies found their workloads changed almost overnight. Many clients decided to temporarily halt their in-progress projects or cancel them. These construction delays made it difficult for firm owners to feel hopeful about the near-term future.

A September 2020 study from the Associated General Contractors of America found that 37% of respondents expected it would take at least six months for their business to return to pre-pandemic levels. A closer look at the statistics showed that 60% of people polled had at least one upcoming project canceled or postponed due to the pandemic. Then, one-third reported having those outcomes for projects they were working on when the novel coronavirus hit.

Firms Struggle With Staffing Difficulties

Although one-third of those polled reported laying off or terminating employees due to COVID-19 challenges, most of them eventually asked those workers to return. However, in 44% of cases, the workers refused to do it. They cited numerous reasons, such as virus-related concerns or family obligations. Relatedly, 52% of respondents mentioned challenges filling hourly craft positions. The results showed that 60% of companies had at least one such unfilled position as of the end of June 2020.

These additional obstacles highlight why it may not be enough once construction companies experience increased demand for work. Those entities also need enough workers to do the necessary jobs. Construction labor shortages existed before the pandemic, but the health crisis may have exacerbated them.

2. An Increased Interest in Equipment Maintenance and Rentals

COVID-19 also created broader perspectives about construction equipment maintenance and rentals. Thus, new heavy equipment industry trends emerged that seem likely to bring prolonged impacts. First, an April 2020 analysis suggested the novel coronavirus would cause a 4% drop in new construction equipment produced. If that comes to pass, it would mean 43,000 fewer machines in the market.

Potential buyers may need to wait longer to source their new equipment in that case. A related effect may be that would-be purchasers shift to becoming even more concerned with equipment maintenance. More specifically, people will likely move away from reactive maintenance. They’ll conclude that proactive maintenance programs boost competitiveness and keep crews more productive.

Proactive maintenance combines smart monitoring with data analytics to give site managers a complete equipment status picture. They can stay abreast of concerning trends and act before a problem causes an equipment failure. It’s wise to take that approach regardless of equipment type or age. However, if a company decision-maker perceives it’ll take longer to order new machines, they may become even more committed to ongoing maintenance.

The Rental Market May Fill the Gap

It’s no surprise that construction business leaders would find it especially attractive in these uncertain times. A company might invest in an expensive piece of equipment to prepare for an upcoming project that ultimately gets canceled or delayed. Renting equipment instead results in a substantially lower upfront cost and provides customers with more flexibility.

A 2021 outlook for the rental market indicated that reservation volumes climbed in the latter part of 2020, helping to balance out a time when COVID-19 caused a brief contraction in people deciding to rent heavy equipment. By the fourth quarter, reservation volumes rose by 6% year over year. Analysts don’t expect rental reservation volumes to bounce back quickly. However, they anticipate seeing them pick up the pace through 2021.

3. A Shortage of Materials

As COVID-19 restrictions caused factory closures and reduced staffing numbers due to social distancing requirements, global supply chains suffered. These realities meant the construction industry faced a material shortage.

A U.S. Chamber of Commerce study that assessed the last quarter of 2020 found that 71% of commercial construction companies dealt with insufficient quantities of at least one material. Lumber and wood were the most common materials to cause such issues, with 31% of respondents reporting them. The study’s participants also overwhelmingly reported that material shortage has a moderate-to-high impact on their businesses, with 89% of people reaching that conclusion.

A Lack of Materials Necessitates Budget Adjustments

The Chamber of Commerce’s study additionally found that 36% of contractors plan to spend more on tools and equipment over the next six months. Relatedly, nearly three-quarters of respondents said price fluctuations had moderate-to-high impacts on their companies.

Besides the material shortage issue, sources report soaring lumber prices that are so elevated that they impact construction firms and their customers alike. A February 2021 release from the National Association of Home Builders confirmed that prices hit a record high that month. That outcome was part of a 10-month climb that ended in costs rising more than 170%.

One high-end builder quoted in the press release said her framing package for an identically sized home more than doubled over the past year, rising from $35,000 to $71,000. She added that her company absorbed most of the extra costs, but it became necessary to delay some projects because they would cause the business to lose too much money.

Another matter discussed in the press release was that these lumber issues could add several thousand dollars to consumers’ costs for their new homes. Some people may decide against that, concluding that now is not the best time to have their homes built.

4. Reduced Productivity From New Safety Protocols

Many government authorities categorized construction companies as essential during the pandemic. That decision let the businesses keep operating, although with reduced numbers and additional health and safety protocols. Even so, businesses in the sector experience reduced productivity for reasons besides construction delays.

Virus Mitigation Measures Hinder Workflows

A July 2020 study from The Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) sought to quantify the lost productivity due to COVID-19 protocols. It found that workers lost 8.7% of their available work hours due to following new virus-related procedures. The research also showed that it could take company leaders as long as six months to see those productivity losses in their business outcomes.

Another statistic in the research showed that workers lose 85 minutes per every 8-hour workday when following the new rules. These conclusions don’t mean company leaders should not carry out such measures, of course. However, they highlight the need to calculate the extra time requirements when setting client timeframes. Moreover, company leaders should do their best to prevent outbreaks but plan what to do if they occur. In Ireland, the construction industry only reopened in early 2021 after COVID-19 ceased all but the most urgent projects.

A recent Irish incident showed how quickly confirmed infections could result in large portions of the workforce taking time off. A project associated with a new Intel facility led to approximately 70 people testing positive for COVID-19. That’s significant, especially since most other sectors in the country remain closed. Site managers immediately began testing and contact tracing, but they’re still trying to determine what went wrong and how to prevent future occurrences.

Construction Firms Must Demonstrate Adaptability

These areas of concern emphasize that construction company leaders must stay abreast of developing situations and adapt to them as nimbly as possible. Planning for what may happen makes it more manageable to respond appropriately as necessary.

 


 

Emily Newton is the Editor-in-Chief of Revolutionized.

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Ethan Smith
Ethan Smith
is the Content Manager at Trader Interactive, managing marketing content development for ATV Trader, Commercial Truck Trader, Cycle Trader, Equipment Trader, RV Trader, and more. Ethan believes in using accessible language to elevate conversations about industry topics relevant to marketplace buyers and sellers.

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