With challenges with the COVID pandemic easing a bit, some of the best construction prospects include manufacturing, distribution, data centers and renewal energy at a time when the Ukraine crisis could contribute to record materials/supplies price increases and volatility.
That was the assessment by Ken Simonson, Chief Economist for AGC of America, in his annual presentation on March 3rd at the Annual State Construction Conference in Raleigh. The conference, 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 said at the conference. Some highlights of his presentation are below. View the full slide presentation.
Medium-term impacts as recovery begins
- 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
- Best prospects: manufacturing, distribution, data centers, renewable energy
Construction spending: 2021 totals vs. 2020
- Total 8%; private residential 23% (single-family 33%; multi 16%); private nonresidential% -2%; public -4%
Largest segments (in descending order of 2021 spending)
- 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%