Should We Prepare for a Construction Boom Post-COVID-19?

Foreseeing Construction Industry Changes in the Wake of the Virus

Fri Jun 12 2020 00:00:00 GMT+0000 (Coordinated Universal Time)

While we’re still uncertain of COVID-19’s long-term effect on our economy, the short-term effects are a bit more evident. As the virus spread, the construction industry was at an absolute standstill. Construction companies faced site shutdowns, worker layoffs, and dwindling funding. The construction industry must find new and innovative ways of operating. And as the industry adapts, we may see a construction boom in the post-COVID world.

Photo credit: UrbanAsh

As more non-essential construction projects get back on track, they will undoubtedly face new challenges: supply chain disruptions, social distancing regulations, and increased restrictions on project budgets. While these obstacles certainly aren’t insurmountable, they do present a unique opportunity for organizations to rapidly change their processes, similar to how they reacted during the 2008 financial crisis.

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Looking forward, we expect a heavier reliance on technology, remote systems, automation, and prefabrication. Not only will the aforementioned minimize incurred damages, but also make these organizations more adaptable in the future. Here, we’ll break down the possibility of a post-COVID-19 construction boom and what it means for a constantly-evolving industry.

Pent-Up Building Demand

According to a study from McKinsey & Company, the after-effects of COVID-19 will shock the industry into rapidly adopting new practices to keep up with building demand coupled with new regulations. Low-interest rates, coupled with increased liquidity being pumped back into the market, will result in more projects and refurbishments.

To meet this demand, Keith Prather, Market Intelligence Expert at Olathe, recommends using the “Fear and Recovery Curve” model. Based on the University of Washington’s Institute of Health Metrics and Evaluation, the World Health Organization, and state and local governments, this model can be used to evaluate when organizations are likely to reopen, formed from individual workers' attitudes and fears on going back to work. To start, construction contractors should track infection rates in their selected areas to prepare for a possible jump in projects. As their cities reopen and optimism builds, so too will their prospects.

Potential Challenges

These demands do not come without their own unique challenges, the most prominent of which is the inevitable supply chain disruption caused by decreased imports and organizational shutdowns. In the long-term, with American businesses increasingly hesitant to utilize Chinese exports, increased manufacturing will take place within the U.S. and Mexico. These new investment patterns will create rebalanced supply chains built for resistance, by building critical inventory, securing new materials, and identifying multiple suppliers.

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The construction industry has always been vulnerable to economic cycles. Pre-pandemic, research suggests that there has only been a 1% increase in productivity per year over the past 20 years. This number, post-COVID-19, is even more staggering: 0.5% globally. According to Forbes, this percentage is different based on your home country, with the U.S. expecting a reduction from 0 - -8%, and Italy, an early virus hotspot, at -10 - -28%. 

With change being slow and the industry traditionally risk-averse, the coronavirus brings forth rapid industrial change. As the report states, “A combination of sustainability requirements, cost pressure, skills scarcity, new materials, industrial approaches, digitalization, and a new breed of players looks set to transform the value chain.” Consolidation, lack of human capital, and sustainability concerns will be other obstacles the industry will face.

Photo credit: Small Business Growth Partners

A Changing Industry

Information gleaned from Procore’s 2,000-person survey revealed that 75% of respondents expected to use more collaboration tools in the years to come. Post-COVID-19 construction trends include higher prefabrication levels, a rise in site surveying drones, and an increase in off-site construction. With the acceleration of site shutdowns in recent months, some workers are no longer able even to reach their job sites, paving the way for remote surveying with drone technology.

Photo credit: Kriscole

Additionally, further on-site safety protocols will likely hinder productivity, leaving organizations scrambling to fill these gaps. Companies that were able to rebound from the 2008 financial crisis were at the forefront of diversifying their portfolios, reallocating resources, and cutting costs by investing in new technologies. This period provides a fantastic opportunity for growth and expansion, and the data suggests that organizations that quickly pivot will see these returns in the long run.

Economic levels for construction aren’t projected to reach 2019’s height until 2023 at the earliest. Moving forward, though, to position your company for the best possible economic outcome, we recommend investing in new technologies early that will aid your remote employees, increase productivity, and offer a sustainable option to those working from home. While supply chains, project budgets, and safety protocols will need to be rethought, we believe the design-build process will thrive. 

If you’re interested in learning more about going back to work, read some of our construction pieces, or cut right to the chase, and start a free trial


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