Age of uncertainty

COVID-19 creates new challenges, opportunities and doubts for the construction industry

In addition to a global health crisis, COVID-19 has created a business challenge unlike anything the modern construction industry has previously faced.

In recent weeks, builders, architects, engineers and suppliers have grappled with project slowdowns and shutdowns, urgent needs for construction of new medical facilities, dramatically altered construction site safety protocols and sweeping uncertainty throughout the economy.

The ultimate impact of the pandemic on the industry won’t be known until the medical crisis is contained. Several BC&E members, however, shared insights about the immediate impacts they are experiencing and the longer-term challenges and opportunities they see.

CONSTRUCTION TODAY

The highly infectious nature of COVID-19 triggered rapid shutdowns of most healthcare and senior living projects in March and slowdowns in some other projects as contractors altered schedules to reduce the density of workers on-site and some tradespeople opted to suspend work.

“The whole approach to construction is different now,” said Joe Versey, Senior Vice President of Business Development at MacKenzie Contracting Company, LLC. “Some workers, some subs are nervous and don’t want to be on a job. We feel that decision is up to them and their respective employers… Companies have become very accepting of people’s decisions on this issue.”

That slowdown is profound on some sites.

“I was on a site the other day where they are building big condo buildings. There were 10 guys on the project. The buildings were empty,” said Michael Martin, President of Live Green Landscape Associates, LLC.

Although most landscape work could proceed, the extent of project slowdowns prompted Martin to make a major change at Live Green in early April and switch to a four-day work week.

“The problem we saw is we were going to catch everybody because production is way off. By June, we could work ourselves out of work, so we had to slow our roll,” Martin said. “I would rather bill 25 percent less now, watch my costs and stretch out my work than do 100 percent now and have zero in the fourth quarter.”

In addition to slowdowns in commercial and institutional work, Martin has seen a dramatic drop – nearly 80 percent – in residential contracting since the pandemic reached Maryland.

“We’re in the middle of spring. Do you think landscapers ever talk about four-day work weeks in the middle of spring? Normally, the phones in my residential department are ringing off the hook… But nobody is thinking about building a deck or a fire pit or a pergola right now,” he said.

THE NEAR TERM

Whenever the COVID-19 outbreak eases and businesses are able to restart more normal functions, work on existing projects should be able to ramp back up. But business leaders caution that many projects will face added challenges.

“Supply chain issues will be part of the juggernaut that prevents us from getting moving,” said Martin. He anticipates delays in sourcing landscape materials from brick pavers to synthetic turf to trash receptacles, as well as a wide range of other construction materials that include components from China.

Jeff Caldwell, Vice President of James Posey Associates Inc., also expects difficulties with obtaining manufactured products. “I have heard from major vendors of mechanical equipment that whatever guarantees they had on lead times are not necessarily applicable anymore because raw materials may be challenging to acquire and factory labor may be challenging to acquire,” he said.

Other factors could significantly impact design, engineering and construction activity for the remainder of 2020.

Developers in some of the hardest-hit areas of the economy, such as retail and entertainment, are choosing to pause some projects, said Fred Marino, President and CEO of Design Collective.

Other owners who are nearing completion of project designs, “are saying, let’s sit tight on getting pricing on construction because we think it will be a more favorable market in another month or two and we might get better prices,” Marino said.

However, not every near-term industry indicator is negative.

A week after Maryland’s COVID-19 shutdown began, Design Collective received RFPs for several school projects and a medical office building, Marino said. “We also had two projects, that had been on hold for totally different reasons, come back to life,” he said. Those included a student housing project on the Eastern Shore and a mixed-use development in Columbia.

Hospitals and emergency management officials have contracted the industry to site, design and build medical facilities for COVID-19 patients.

“There are other clients who have struggled to find a time to renovate a property or do infrastructure upgrades without inconveniencing tenants. They now see a golden opportunity to do those projects while their facilities are devoid of occupants,” Caldwell said. However, those projects, he added, face uncertainties over whether they will be able to source materials and contract installation crews.

THE LONG VIEW

Understandably, uncertainties about the COVID-19 crisis raise questions about future prospects for the construction industry.

James Posey expects to have “a full and productive year in 2020” without any work cancellations, Caldwell said. But the current slowdown in procurement activity by government and institutional clients combined with anticipated reductions in tax revenues and endowment funds could dampen activity in 2021 and 2022.

“I hope we will have a V-shaped recovery and there is not that large of a hiccup in 2021 and 2022. But I have some reservations about where demand will be in those years so we will be planning to be as efficient and supportive to our clients as we can,” he said.

Based on the previously robust economy and construction sector, Versey anticipates a rapid revival of construction activity once the medical crisis eases. He also expects to see new kinds of opportunities surface.

“Things are going to change in our society,” he said.

More workers will likely opt to telecommute permanently. Others will seek different setups in their offices, such as larger space with more barriers, better air handling systems and improved technology. Many medical offices may need renovations to alter or eliminate waiting rooms and better protect patients from infection. Schools and universities may need different spaces and systems to support distance learning.

“So I see a lot of opportunities for us to respond to this big change in the world,” Versey said.

Work levels within the design community, hopefully, will get back to normal by the end of 2020 as architects tackle ongoing and brand-new needs, said Scott Walters, President of AIA Baltimore. “Change is inevitable. Normal won’t be the same as it was two months ago. But architects have unique abilities at problem solving and helping to shape the future. As a profession, we can help make the built environment better for us all.”