The year 2020 has been anything but normal or predictable due to the pandemic. Some commercial construction sectors like hotels have plummeted this year while others like warehouse construction have endured through the economic downturn amid the crisis. What will 2021 look like — recovery, further decline or accelerated growth? Most likely there will be a blend of negative, positive and mixed growth in the new year.
In 2021, the United States and the world will continue to deal with the economic and health crises caused by the pandemic. Some forecasters are cautiously optimistic for the future but remind us that meaningful growth is still several months away.
Forecasters are reporting that the overall dollar value of commercial building starts will increase 5% in 2021. Here is a brief overview of the commercial construction outlook in 2021 by selected market sectors.
Office construction starts are predicted to increase due to the rising demand for data centers, which are included in the office category, and to the need for renovations to existing space for physical distancing and for well building design criteria.
Retail construction is a sector already in decline because it was hit extremely hard by the pandemic. Several retail companies have filed for bankruptcy. The current new wave of increasing COVID-19 cases across the U.S. means foot traffic will continue to decline and cause further economic hardship for retail.
Contrasting the loss in retail construction is the continuing growth of warehouse construction. Warehouse starts grew 2% in 2020, to $30.7% billion, with another 8% increase expected in 2021, according to Dodge Reports. Warehouse construction will be the leader and the big winner as e-commerce continues to drive the need for more logistics infrastructure.
Forecasts indicate that institutional construction will increase by a mere 1%. Public building construction will be significantly impacted with budget deficits continuing to increase at state and local governments.
Higher education construction is expected to show additional declines in 2021 due to lost revenues in 2020.
Healthcare construction is expected to grow as healthcare systems plan to improve their facilities to be prepared to handle future pandemics.
Manufacturing plant construction is expected to remain flat in 2021.
JLL construction research notes that long-term construction sentiment is positive for the first time since 2014. This research also reports a strong consensus across construction firms that this recession will be behind us in the next two to three years and that the industry will return to growth.
The construction industry generally has been slower in adoption of new technology than some other industry sectors. However, the pandemic has led to a permanent and industry-wide increase in the adoption of construction technology.
Putting forecasting into perspective, I leave you with this quote from Paul Saffo, a technology forecaster based in Silicon Valley and Consulting Professor in the School of Engineering at Stanford University: “The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present.”
Glenn Ebersole is a registered professional engineer and is the Executive Director, Strategic Business Development/Marketing for RCS Construction — a woman owned general contractor firm — in Collegeville. He can be reached at 610-415-1130Call via Mitel or [email protected].
