In early February last year, we hosted Jay Bowman to provide his forecast for 2020. Little did we know at the time that just weeks after his presentation, state and local governments would be putting in place lockdowns and stay home advisories to curb the spread of the then novel coronavirus. One year later, what do we really know about the impact COVID-19 has had on the construction economy and the future outlook? Jay gave his detailed forecast in a 60-minute virtual event, which we’ve summarized below, or you can watch in full here.
One of the most crucial things to examine is what market and segments are you serving. The outlook in Cincinnati, Indianapolis or Dayton is most certainly different than that of Los Angeles or New York. Similarly, the segment your company works in matters; healthcare, commercial, or multifamily, it is important to take into account that each of these all have different outlooks that add up to a whole picture.
It is widely known that the construction industry lags the general economy by one, or sometimes even two years. 2020 construction spending put in place finished 1% above 2019, despite the pandemic. Much of this is attributed to work that was awarded and started in prior years, therefore FMI expects 2022 to be the low point for total construction spending put in place. However, Bowman did indicate that in the worst case scenario of a prolonged recovery, a four year decline with a trough in 2024 could happen. Understanding and anticipating your company’s cashflow and project queue will be critical to map your strategic plan as the recovery unfolds.
FMI is bullish on certain markets given the current environment. Manufacturing, and specifically the sub segments of biological and life sciences are especially high-growth potential markets. Distribution is still a strong segment, especially in the e-commerce and cold storage sectors. Data centers will also continue to grow, and intelligent transportation systems, including electric vehicles, electric vehicle charging, dynamic messaging systems, and intelligent tolling will also likely experience more growth opportunities. On the flip side of that coin, other segments that are expected to continue to struggle include lodging, commercial, amusement and recreation, and office space.
Additionally, Bowman urged attendees to weigh both the forecasted growth of a segment with the expected overall spending put in place in that segment. While multifamily, office and commercial are projected by FMI to have an approximate 6% negative growth in 2020 through 2024, the amount of spending put in place in 2020 across the United States in these segments was around $80 billion each, only outpaced by manufacturing, education, highway and street, and power. While there is an expected contraction in those segments, there is still a significant amount of expected spending as a percentage of total spending put in place. Conversely, FMI is forecasting a 4% growth from 2020 to 2024 in communication, but 2020 total spending put in place for this segment was just over $20 billion, the fifth lowest of segments covered.
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Want to hear more about what Jay Bowman had to say? Get access to the webinar recording here, or talk with a Barnes Dennig construction industry expert to go beyond the numbers in finding ways to build a more successful future.