If there’s one thing constant about the markets, it’s that they’re always changing. And the coronavirus is challenging all current assumptions about the construction market outlook. Supply chain slowdowns are already affecting construction sites, and the stock market has had its most significant drop since 2008. There’s no telling how or when it will recover.
Prior to the outbreak, however, regional economic forecasts were looking positive for the construction market. In early February, The Miller Group sponsored the Associated General Contractors of America Missouri Chapter’s event, 2020 Economic Forecast – Kansas City Region, to hear from the experts.
No recession this year
Brian Moore, a strategy consultant for FMI Corporation, said expectations for a near-term recession seemed high, especially given the yield curve’s inversion three times in the last year and predictions that the long expansion is nearing its end. But no expansion dies of old age, he said, and the data around construction put in place was continuing its steady climb. His organization did not expect to see a recession for another year or two.
In fact, he shared a forecast of 1% increase in construction and engineering spending over 2019 and 2% through 2023. The growth is likely to occur in the public infrastructure, water supply, conservation development, public and public/private sectors. But he expected a drop off in the residential and private markets compared to last year.
Missouri residential construction down
In Missouri specifically, Brian saw residential construction trending down, with commercial construction following suit. Public and mixed public projects were more optimistic places to be. Growth and spending also have been concentrated in fewer cities and fewer projects. Nationally, megaprojects – over $1 billion – made up a third of total construction in 2019 – up dramatically from 3% in 2013.
Speed to market pressure continues
Another critical trend: The acceleration of speed to market – especially for larger projects. The average is now 72.6 months for projects over $250 million, driven primarily by owner urgency to put capital to work. On a collision course with this urgency is the staffing challenge faced by nearly every contractor and every trade.
Interesting technology innovations
Some aids to speed: technology advances, 3-D printing and the rise of offsite manufacturing and construction. Brian said the tech industry is investing billions in construction, with a few venture capital funds focused solely on the industry. Some of the fascinating projects he’s noted: robotic bricklayers and drywall installers, online home construction and robotic “dogs” that roam the job site to capture progress photos, bring tools to people and identify job site intruders.
By Chris Miller, Commercial Risk Advisor