As COVID-19 pandemic challenges are easing, the already significant construction materials price increases and volatility could reach record levels following Russia’s invasion of Ukraine.
These were some of the key observations of Ken Simonson, the Associated General Contractors (AGC) of America‘s chief economist, in a presentation to the 2022 NC State Construction Conference in Raleigh on March 3.
Some of the best construction prospects include manufacturing, distribution, data centers and renewal energy, he said. (The Carolinas Associated General Contractors (CAGC) originally reported on Simonson’s comments in its CAGC Newsroom.)
The annual conference — returning to in-person programming after the COVID-19 break — held at the McKimmon Center at NC State University, drew about 1,000 registrants (roughly 800 in person and 200+ online).
“I think we are in for a lot more supply chain problems,” Simonson told the conference.
Some highlights of his presentation as reported by CAGC include.
- Economic recovery looks more certain but virus risks remain, especially for construction: low worker vaccination rate; possible pullback by owners on project starts;
- Slower rebound than for other sectors as owners, investors/lenders, institutions, and public agencies face uncertainty about future demand, project costs, and completion times;
- Continuing cost and supply challenges may lead to more project deferrals;
- Infrastructure funds will take time to distribute and award to individual projects, muting the medium-term impact on labor and materials supply; and
- Best prospects: manufacturing, distribution, data centers, renewable energy.
Simonson said construction spending increased 8% in 2021 compared to 2020, with the greatest increase in private residential, which grew by 23% (single family 33% and multi-family, 16%.)
Conversely, private non-residential spending declined by 2% and public works spending declined by 4%. Not not surprisingly, lodging took the biggest dive, at 32%, as people stayed at home rather than traveled during the pandemic.
The largest non-residential segments (in descending order of 2021 spending) are:
- Power -0.1% (electric 1%; oil/gas fields & pipelines -5%)
- Highway and street 0.3%
- Education -9% (primary/secondary -7%; higher ed -14%)
- Commercial 4% (warehouse 16%; retail -8%)
- Office -6%
- Mfg. 9% (chemical 7%; computer/electronic 27%; transp. equip. -0.5%; food/beverage/tobacco 31%)
- Transportation -6% (air -10%; freight rail/trucking -6%; mass transit -0.7%)
- Health care 2% (hospital 5%; medical building 0.8%; special care -6%)
- Lodging -32%