The COVID-19 pandemic has had unprecedented impact on global economy and disrupted industries and businesses. The immediate impact of the pandemic on construction industry is palpable through building and labor market. The construction employment in Georgia witnessed a dramatic drop in April and moderate growth after May. The pandemic also wreaked havoc the building market in Georgia. The building permits in April plunged 20% below March. The lagging effects of the pandemic on construction industry started to merge as project delays and cancellations counted up to $9.6 billion at national level till August. Other than project delays and cancellations, labor shortage, declining revenue and construction spending all pose risk to the funding environment, which leads to the long-term effect of COVID-19 on the construction industry.
This paper collects data in the construction field and reviews the beneath trends which provide an overview of the impact of COVID-19 on the construction industry in Georgia.
The construction employment in Georgia saw a 6% drop in April which reflects the substantial job loss among construction industry as a result of the pandemic. Project cancellations, equipment and materials shortage all led to the decrease in construction jobs. Moderate growth was observed after May as local restrictions on construction work was gradually lifted. Similar for construction jobs in Atlanta, the labor market was healthy for the first two months of 2020, rising 1% from the same period of 2019. The growth stalled in March when the pandemic hit the nation. The April low indicated a significant amount of job losses among construction employees.
The average weekly earnings of construction employees in Georgia was subject to small variations From January to April. The May average weekly earnings inched up 6% from April. The large increase reflected the extensive job loss among low-paid workers as a result of the economic shutdown. As the pandemic hit hard on the industry labor market, a majority of contractors expressed concern over the labor market. A survey by Dodge Data and Analytics on 99 contractors across the US reported higher level of need for skilled workers (Dodge Data and Analytics, 2020a). The shortage of skilled workers would lead to challenge in meeting project schedule, more competitive bidding environment, and higher cost of skilled workers.
Housing Starts and Building Permits
Through the first six months of 2020, commercial and multifamily starts have fallen by 22% compared to the first half of 2019, with top 3 metro areas: New York falling 24% to $11.5 billion, Washington DC falling 42% to $4.2 billion, and Dallas only 2% drop to $3.8 billion. For cities in the south area, construction and multifamily starts in Miami fell 16% to $2.8 billion, Austin fell 12% to $2.4 billion, and Houston fell 38% to $2.4 billion (Dodge Data and Analytics, 2020b). Atlanta ranked 11th among the metropolitan areas, with $2420 million commercial and multifamily starts, falling 32% compared to 2019. (The increase in Phoenix is due to the start of some large projects, for instance, $300 million Pier 202 mixed use building, $200 million 100 Mill Ave office development, etc. (Dodge Data and Analytics 2020b))
Building permits also experiences significant drop as a result of the unprecedented impact of COVID-19 on the building market. The pandemic outbreak led to a sharp decrease in April. The construction activity was shut down or operated under restrictive guidelines. The full force of the pandemic hit hard on Georgia building permits in April compared to 2019. Overall, building permits started to increase from April lows as construction resumed gradually in some areas from May. The growth continued in June and July. Residential building permits (units < 5) in Georgia posted a steady gain after May. By contrast, the decline trend in commercial building permits (units > 5) continues till July despite the pickup in May. Residential and commercial building permits in Atlanta show similar trend as of state level data.
Construction Spending at National Level
Construction spending decreases for fourth consecutive month till June as lagging-effects of the coronavirus. The decrease in private work outweighed the rise in public work in May. The pickup of public work in May faded as a drop of 1% occurred in June. The private-sector funding continued to remain below pre-coronavirus level as many owners incline to delay investment under the grim funding environment.
Project Cancellations and Construction Layoffs
American Road and Transportation Builders Association (ARTBA) reported $9.6 billion infrastructure projects in total have been delayed or canceled amidst the COVID-19 pandemic. Till August, sixteens states, including Georgia announced project delays or cancellations counting up to $5 billion. The rest $4.54 billion were attributed to local governments and authorities. Particularly, Georgia will cut $296.9 million (14%) budget for the department of transportation fiscal year 2021, involving $95.6 million in capital maintenance work, $48 million in routine maintenance and $97 million coming from project delays (ARTBA, 2020). Declining revenues created pressure on infrastructure systems which are supported with revenue streams (American Society of Civil Engineers (ASCE)).
According to a survey conducted by Associated General Contractors of America (AGC) where 179 responses from companies located in the southern U.S. were collected, half respondents reported projects cancellation that were scheduled to start between June to August which left contractors struggling with business decisions (AGC, 2020b). Another survey by AGC found that forty percent of construction firms reported layoffs in April. Project cancellation has caused a great number of loss in construction jobs (AGC, 2020a).
The precipitous drop in the project pool and dramatic increase in projects placed “on-hold” point to the lagging effect of the pandemic in construction industry. The long-term effect of the pandemic on the industry is likely to continue. First of all, the “shelter-in-place” policies significantly impact construction site activities, causing schedule shift, change orders, labor shortage, etc. which impose heavy burden on timely project delivery. Secondly, relaxing and lifting the restrictions does not necessarily lead to a full recovery in the industry, since the global shock of the pandemic has interrupted supply-chain of major materials. Construction activities were disturbed by material and equipment shortage as reported by several states. Last but not least, it takes time for construction companies to develop and implement appropriate operating practices and protocols to adapt to the “new normal” working environment (personal protective equipment (PPE), social distance, etc.). The above uncertainty and risks all add to projects delays and disruptions. Some promising technology might be adopted to improve safety, efficiency and mitigate the aftermath of COVID-19, for instance, E-ticketing, which proved to be beneficial across time, money, processes, communications, payments, and execution through a case study by Iowa Department of Transportation (IDOT) (Dodge Data and Analytics, 2020b). However, there is no “one size fits all” solution, given that government regulations to address COVID-19, and actions taken to mitigate financial risks vary significantly in addition to the volatility in the construction market and economic condition. Owner organizations, contractors and professionals in the industry shall have better understanding of the challenges brought by the virus and variability in the construction market to maximize the utilization of limited resources and prepare proactive risk mitigation strategies for enhanced decision-making.