AGC, Sage Construction release 2021 outlook

Construction contractors expect 13 of 16 market segments to contract this year, according to the 2021 Construction Hiring & Business Outlook Report from the Associated General Contractors of America (AGC) and Sage Construction & Real Estate.

The net reading – which is the percentage of respondents who expect a market segment to contract versus expand – was most negative in retail construction, which has a net reading of minus-64. Similarly, lodging and private office construction each have a net reading of minus-58.

Higher education construction (minus-40); public buildings (minus-38); and K-12 school construction (minus-27) were also significantly down.

In contrast, construction of clinics, testing facilities and medical labs (plus-11), and warehouse construction (plus-4) have positive net readings, but AGC says those segments track closely with the impacts of the coronavirus.

Delays and cancellations

Fifty-nine percent of survey respondents in the Outlook said they had projects scheduled to start in 2020 that have been delayed until this year. Nearly half – 48 percent – of respondents said they had projects canceled in 2020 that have not been rescheduled.

In addition, 18 percent of contractors who participated in AGC’s survey report projects scheduled to start between January and June that have been delayed. Eight percent report projects scheduled between January and June that were canceled.

“This is clearly going to be a difficult year for the construction industry,” says Stephen Sandherr, CEO of AGC. “Demand looks likely to continue shrinking, projects are getting delayed or canceled, productivity is declining and few firms plan to expand their headcount.”

Labor

Eighteen percent of contractors who participated in AGC’s survey report projects that were scheduled to start between January and June of this year have been delayed. Photo: P&Q Staff

Only 35 percent of survey respondents expect to add staff this year, while 24 percent plan to decrease their headcount this year. Forty-one percent of firms expect to make no changes in staff size.

By region, 39 percent of Southern-based contractors expect to add staff, while less than one-quarter of respondents in the Northeast expect to expand headcount.

Similarly, 41 percent of Northeast-based firms expect to reduce staff size while just 17 percent of Southern firms expect to do the same.

When it comes to hiring, the majority (54 percent) of respondents report difficulty finding qualified workers to hire, and 49 percent expect it to remain the same, if not become more difficult, throughout the year.

“The unfortunate fact is too few of the newly unemployed are considering construction careers despite the high pay and significant opportunities for advancement,” says Ken Simonson, AGC’s chief economist. “The pandemic is also undermining construction productivity as contractors make significant changes to protect workers and communities from the virus.”

Simonson also notes that 54 percent of contractors say the cost of completing projects has been higher than expected.

Tech wave

Sage Construction & Real Estate officials note the advancement of IT in the industry, with 62 percent of contractors reporting they have a formal IT plan to support business objectives – a 20-point increase from last year’s survey.

Seven percent plan to implement a formal IT plan this year, the survey says.

“While the past year has been filled with many challenges, technology has played an integral role in keeping people connected and businesses up and running,” says Dustin Anderson, vice president at Sage. “While many firms have had to scale back other investments, technology remains an important part of most business plans as we move into the new year.”

2021 expectations

Looking ahead, 55 percent of firms do not expect their volume of business to return to pre-pandemic levels for more than six months, or they are unsure when their businesses will recover, according to the survey.

Just one-third of firms say business has already matched or exceeded year-ago levels, and 12 percent expect demand to return to pre-pandemic levels in the next six months.

“There is work available, but you have to work harder at getting it,” says Rosana Privitera Biondo, president at Mark One Electric, during AGC and Sage’s forecast roundtable.

As economic- and virus-related uncertainty persists, AGC officials continue to push for federal infrastructure investment to boost both the industry and the economy as a whole.

“The outlook for the industry could improve, however, if federal officials are able to boost investments in infrastructure, backfill state and local construction budgets and avoid the temptation to impose costly new regulatory barriers,” Sandherr says. “But even as we work to advocate for measures to rebuild demand for construction, we also need to take longer-term steps to continue developing the construction workforce.”

AGC and Sage’s survey included results from more than 1,300 firms across all 50 states and the District of Columbia. Contractors of all sizes answered more than 20 questions about a range of industry topics.