A Construction Industry Outlook For 2021
Seeing a silver lining behind every cloud will be the smart approach to assessing the outlook for construction in 2021. COVID-19 will continue to have a negative effect on certain sectors of the market, primarily in commercial construction, but there remains a confident attitude for the residential market, especially in remodeling. Contractors will need to follow the money even though it may not lead down familiar paths. Roofing and flooring will be categories that continue to see growth in spite of the pandemic.
How The Construction Industry Fared in 2020
Depending upon which source you go to for your statistical data, many predicted gloom and doom for the construction industry in 2020 due to the disruption in the economy caused by COVID-19. However, according to the latest statistics from the U.S. Census Bureau, residential housing is doing remarkably well. Overall:
- Permits pulled for single family housing are up, year to date.
- Single family starts are up 9.2% from 2019; and
- Completed single family houses are up 9.6% since 2019 (seasonally adjusted rates).
In September alone, U.S. housing construction was up 1.9% and some news outlets are reporting that residential construction is still a bright spot in the economy. This is an encouraging report for our industry as much of that growth will be enjoyed by the remodeling/home improvement sector which is a huge source of business for flooring installers.
Commercial construction was up in some sectors and down in others from the period August 2019 to August 2020. Commercial office space saw a decrease of 2.8% while general commercial construction saw an increase of 2.5%. Overall, nonresidential construction spending was up almost 5% during this period and most contractors increased their business.
There is no question that COVID-19 threw a wrench in the gears of construction during the last 10 months. Pricing for raw materials — especially lumber — saw increases of over 100% in some areas. There were material shortages across the board and some businesses could not stand the strain and had to close shop — either temporarily or permanently.
However, to the amazement of everyone, the construction industry continued to operate at full speed in most areas of the U.S.
Shortage of Labor Slowed Growth
The biggest hindrance to more growth in this sector was not the pandemic but a real shortage of qualified labor — a shortage that has continued for more than a year. Before COVID-19 was an issue, the construction industry was marred by an overwhelming instability in the labor force. Many projects were stalled because of it and just when things were getting back on track, the pandemic started forcing workers out of the market as more cases were being discovered.
Delays Are Not Just in the Construction FIeld
Much of the problem with completing projects was the inability of different manufacturers to consistently produce finished products due to the layoffs caused by the virus in their supply lines. Builders stood prepared to finish jobs but faced 6-12 week delays because much of the supply from China was cut off or moved to other countries where weeks and months were required to get their output back to speed.
Projections for the Construction Industry in 2021
The construction market in the U.S. is forecasted to shrink by 2% in 2021, but a quick recovery is expected with growth in the 1-2% range per year through 2024. If the Fed continues to hold interest rates down, major construction firms may be willing to take on projects that are capital intensive since bank loan rates will remain low.
Though many are forecasting a decrease in overall spending in construction through 2021, the remodeling industry is a $95 billion dollar a year business and is expected to continue to grow over the next 5 years. Many of these opportunities will be realized by contractors that are willing to expand their marketing efforts and not just wait for the phone to ring.
Flooring Market Opportunities in 2021 and Beyond
One of the positive effects of the pandemic is that more and more people are working from home, and the longer they stay home, the more they look at their floors. This increased focus on their floors is causing many to opt for a new, more modern look that can be achieved with today’s advanced materials and designs.
Some estimate that the flooring market is going to grow at about 6% per year between now and 2027. Helping to fuel this growth are the technological advances in interlocking edges making many of the luxury vinyl plank tiles and engineered hardwood flooring easier to install and increasing their useful life in the home and office.
Trends for 2021 will see an increase in waterproof options and more comfortable alternatives to natural wood and stone — though both will remain popular.
- One option that is becoming popular is ceramic tile that looks like hardwood. It provides the warmth of a wood floor and the ability to stand up to a spill in one convenient package.
- Luxury vinyl plank tiles are gaining popularity due to their soft surface, wood and stone-look designs, and waterproof performance.
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