Post-pandemic Construction Challenges & Opportunities in the US
The emergence of the pandemic has dived the construction industry into its hardship with falling revenue and increasing project delivery challenges. Several construction projects got delayed and canceled, supply-chain disrupted, and workforce shortage and liquidity deficit encountered across the globe due to the pandemic. Global agencies estimated the construction industry to contract by 7.3 percent in Western Europe and 1.7 percent in North America in 2020.
Suspension of production and distribution of construction supply materials, limited transportation, and travel bans increased the cost of construction raw materials. And the construction enterprises suffered low profitability due to delays in project delivery dates.
Slowly, as things are coming to normal, construction companies are adopting the COVID rules and guidelines, with emerging technology and aid of relief packages by the US government to resume the work.
But there are several other challenges like staffing, material cost rise, supply chain issues, and derailed procurement calendar due to long time work suspension encountered by the contractors and businesses. However, all these challenges can be handled by outsourcing the project management consulting activities by a professional service provider.
How the Pandemic Has Impacted the Construction Industry
COVID has significantly affected the construction industry, and it can get observed across several countries. The sudden rise in COVID cases forced the government in several countries to impose immediate lockdown put a temporary halt on the ongoing projects.
In the EU, construction production has diminished by 1.6% in February 2021 compared with January 2020. Civil engineering has dropped by 3.4 percent whereas, the construction of buildings dipped by 1.9 percent.
The Australian construction industry that is dependent overseas on building materials and equipment has to face supply chain disruptions. Suppliers from different parts of the world stopped or slowed down the manufacturing production to prevent the spread. Restrictions on the movement of people led the Australian contractors to suffer from a lack of materials like aluminum, glazing, plumbing fixtures, carpet, tiling, lifts, and mechanical & electrical parts.
California and its most COVID-affected regions halted the construction project except healthcare, low-income, and senior housing. Strict guidelines for social distancing, increased sanitation efforts, additional sanitation stations, COVID-19 signage, and employee screening; were laid down for the construction industries.
In the US, COVID brought several challenges to the construction workforce, contractors, architects, engineers, businesses, and other project stakeholders.
Challenges for Construction Workers
As the pandemic resulted in workload reduction in the construction industry, furloughs and layoffs started happening on a larger scale. In the US, the projected engineers observed a decline of 50 percent to 60 percent workload; as compared to previous years. Contractors and sub-contractors started facing cash flow challenges, forcing furloughs and layoffs across the industry.
The layoff impacted the craft workers, project engineers, estimators, administrative employees, and others. The construction workforce layoff also raised the fear of their transition to other industries. Uncertainty of the pandemic also raised mental health issues among the workforce.
Independent Architects and Contractors
Many independent architects in California had to close their offices and work remotely after the lockdown announcement. They faced new communication challenges due to remote working. The cancellation of several projects has hit the architects badly.
Contractors have to face several challenges from the labor shortage, materials delay & shortage, to worker’s health and safety and cash flow challenges. They also dealt with the delay in inspections and permitting. All these factors added to the slow-down of ongoing projects. Contractors had to look for new ways of working to ensure productivity and product delivery to their clients.
In the pandemic situation, financial stability and liquidity problem has become the priority of major construction firms. Many firms suffered a sharp drop in the market valuations due to disruptions by the pandemic, and it affected SMEs the most.
Another challenge for construction firms was the safety concern of their employees. Research in Los Angeles concluded that construction workers reported the highest number of COVID positive cases as to workers of other industries.
In several parts of California, construction firms imposed basic policies adhering to the CDC guidelines. For example, Hanover company had to close all their projects which were less than ten percent housing.
In Los Angeles and other orange countries, they continued their projects with new job safety protocols and procedures.
Several hurdles and challenges encountered by the project stakeholders have compelled them to be substantial collaborate to deliver the project. Contractors have to partner with clients and other stakeholders more frequently for risk analysis, discuss contract restructuring, the well-being of the workforce, adoption of new technology, safety, manage supply-chain issues, cash-flow, etc.
Real Estate Companies and Realtors
COVID-19 impacted the US residential real estate industry the most by dropping home sales. New York City has a decline of 58 percent in pending home sales in April 2020 compared to last year. And metro areas of the US; observed an average decrease of 33 percent due to economic uncertainty, health concern, and stay-at-home orders. It led fewer buyers and sellers to list their properties or allow visitors to look at the property.
Post-pandemic Situation in the AEC Industry
The construction industry has taken several efforts and measures to handle the pandemic-related challenges. Such as the Bechtel group in the US has taken numerous preventive steps to bring back the labor to the worksite. Remote working is the new norm, where new projects are allowed to get designed from remote locations. Contractors are using online channels to monitor the employees.
To maintain the immediate crisis, construction firms are reviewing capital, capital cost budget, raising funds, and considering stimulus package from the government. US government announced a second COVID relief fund of trillion 1.9$, a fraction of which has also got allocated for the construction industry.
The AEC and the real estate industry are fighting to revive as the pandemic is inducing and increasing several disruptions and challenges.
Shortage of Labor
In the year 2020, several projects were canceled and paused, causing a reduction in construction revenue and demand for labor. Several lost their jobs because of layoffs and furloughs, and many skilled workers had left the workforce.
According to the 2020 construction outlook survey by Associated general contractors of America, around 81 percent of the construction firms agreed that they are dealing with challenges in finding a qualified and skilled workforce to fill their salaried and hourly craft positions. And 71 percent of them believe labor shortage to be the biggest hurdle in 2021.
Supply Chain Disruptions
Lockdown resulted in supply chain disruptions in almost every industry, like material shortage and delivery delays. The construction industry faced a jump in construction materials prices between 2020 and 2021.
The price of Iron and Steel increased to 15.6 percent from January 2020 to January 2021. And softwood lumber became 75 percent more expensive in 2021 compared to 2020. It impacted the residential construction sector, where lumber gets used for house framing. As per the National Association of home builders, now a single-family home is 16,000$ more expensive.
Construction work is inherently collaborative and requires several trades to work alongside. They need to share workspaces and facilities. And to maintain social distancing and other safety guidelines is not so feasible at the site. Therefore, the spread of the virus in construction places is a big concern. Other challenges were scarcity of masks, breathing difficulty while performing strenuous tasks with a face mask, etc.
Reduction in Efficiency and Productivity Rates
Productivity took a backseat in construction, as the safety of the workforce became the priority of employers. Safety measures like social distancing reduced the number of workers at the site. Shortage of PPE kits, quarantining requirements, fear of infection also reduced the number of workers affecting productivity.
Cash flow challenges led to payment delays and material shortages. And delay also caused productivity losses.
Increase in Disputes, Litigation, and Claims
The challenges like delays, temporary suspension of work, material shortage, additional cost due to rise in prices of materials, and cost overruns increased the chances of disputes, litigations, and claims in the industry. Likelihood of disputes between contractors and owners related to project delivery and between contractor & sub-contractor, contractor & supplier, owner & tenant, increased.
How Things Are Shaping up in the US Post Pandemic and Opportunities
To cope-up with pandemic challenges, construction and Real-estate firms are bringing several changes in their working norm. A tech-savvy culture can improve communication, increase accuracy, reduce downtime and keep the workers safe.
Many construction firms started using video-conferencing and cloud file-sharing technology to promote work from home culture. Labor shortage issues are getting managed using the right construction software with an automated drone surveying workflow.
Real estate agencies are increasingly adopting digital technologies to mitigate the pandemic impact. Lockdown has raised the demand for a virtual walkthrough of properties to get an insight. Buyers and investors want to see the plan before investing in a property that is just in its planning phase. Therefore, digital modeled portfolios have got introduced by real-estate firms to showcase their project plan. Product visualization technology like a digital furniture portfolio can boost the industry by reducing the cash-flow challenges.
Opportunities for Architects and Engineers
In addition to the various challenges, the pandemic has also brought few opportunities for architects and engineers. Since the lockdown period got extended, people started confronting the inadequacies of their domestic spaces to keep themselves away from infections.
Architects and engineers are coming up with new and innovative solutions and designs to meet these challenges.
Spacious Home Design
Restrictions to the go-out of the home are increasing the demand for spacious home design. The interest in the design model with space for entertainment and activities is rising.
To remain close to a natural home with private green space is gaining popularity in pandemic due to restrictions in open green spaces and parks. Better landscape design with natural elements
Covid-19 has threatened the idea of tall buildings, with elevator cores to increase density and urban life filled with social energy to live happily. Pandemic has shifted the focus towards a health-oriented approach such as landscape design with natural elements. It helps to improve the air quality and offers a natural defense against the disease.
Sustainable and Go Green Architecture
Sustainable buildings provide stringent and open ventilation, reduce the negative impact on the environment, reduces carbon emission, and are energy efficient. Sustainable and go green is increasing in demand as people are trying to connect to nature.
Buildings with Touchless Technology
Touchless doorways or doorless entrances in larger units are preferred to stop surface contamination. Voice-activated elevators, hands-free switches, restrooms with automated doors, and touchless automatic toilet values are high in demand.
Innovative Design Ideas and Project Management Consulting Will Win the Market
OneStop AEC (OSA) is a leading architectural, designing, and project management consulting service, provider. We are working with clients from different sectors across the globe. The team of OSA is continuously providing innovative solutions to several complex challenges for years to their clients. Our Architects and engineers are constantly monitoring the market change due to Pandemic. They are coming up with creative and sustainable design solutions for their clients to minimize the risk of infection and protect human health.