Commercial Construction Will Take a Hit in 2021

Despite big infrastructure plans proposed by President Joe Biden, market analysts and industry experts are not expecting major growth in most construction sectors until 2022.

Source : Wikimedia Commons

February 1, 2021

Author : Patty Rodriguez

While single-family residential home construction is expected to rise modestly in 2021, other major construction sectors in the commercial sphere like retail, hotels, sports centers and restaurants are expected to continue suffering.

“Office, lodging and shopping center segments appear especially vulnerable,” Associated Builders and Contractors (ABC) chief economist Anirban Basu said in a press release, though there may be some relief for contractors retrofitting hotels and offices to accommodate social distancing needs.

“Many industry stakeholders and other Americans turn their eyes to Washington in the hope that a meaningful infrastructure package is forthcoming,” he added.

“The near-term outlook for nonresidential construction is not especially optimistic,” Basu said, adding “Investment in structures was up just 3 percent on an annualized basis during 2020’s final quarter after declining by 33.6 percent and 17.4 percent in the year’s second and third quarters, respectively.” 

Another index by the American Institute of Architects says “construction activity in 2021 is projected to be weak.”

In the commercial sector, “This year, the steepest declines are expected to come from office buildings (down over 9 percent), hotels (down 20 percent), and amusement and recreation (down almost 13 percent). Healthcare and public safety are the only major sectors that are slated to produce gains this year,” according to the report.

Analysts from multiple organizations are pinning their hopes on yet another stimulus package and a widespread vaccine rollout by mid-2021 so construction workers can get back to work.

Forecasts for 2021 by Dodge Data & Analytics are similarly dismal, according to chief economist Richard Branch. With a 14 percent of decline in the dollar value of construction starts in 2020, a rebound of just 4 percent is expected in 2021. That’s an increase of just $33 million.

According to Dodge, residential starts are expected to rise 5 percent, with single-family housing starts specifically rising at 7 percent. While commercial sector construction is also expected to rise 5 percent, it saw far more significant drops in 2020, at a rate of 23 percent compared to the mere 2 percent drop in residential construction in 2020.

“While the recovery is underway, the road to full recovery will be long and fraught with potential potholes,” Branch said in the press release

Photo via Wikimedia Commons.

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