In contrast to the buoyant residential construction demand, the non-residential building sector did not see a similar post-lock down rebound as activity declined throughout the second half of the year. Put-in-place construction expenditures for non-residential buildings in 2020 ended at $462 million, 2.1% down from 2019 despite high order backlogs at the start of the pandemic, with declines in commercial and industrial building somewhat offset by gains in institutional and public sector work. Each quarter activity was progressively lower than the prior quarter. The consensus forecast for 2021 calls for a greater decline in expenditures of 6% to $430 million as pre-Covid backlogs have been absorbed and the lagged impact of declining starts is felt across all segments – 2020 saw a 24 percent decline in non-residential building starts, falling to $239 million. The AIA ABI (Architectural Billings Index) ended the year at 42.6, the eleventh consecutive month that firms reported a decline in billing (ABI below 50).
Suppliers have adjusted to the adverse market conditions to manage profitability and cash flow, while at the same time addressing long term themes that are anticipated to accelerate in the post-Covid construction market:
Technology Adoption and Integration
- Building Information Modeling (BIM) becoming widely adopted
- Rapid growth of other technologies such as drones, augmented reality, cameras, laser scanners and 3-D printers, along with mobile and cloud apps
- Increased off-site and pre-construction practices in response to unpredictable material pricing and tight labor market, offering the potential for reducing overall project cost and faster completion
- More markets embracing modular construction, from healthcare to education to offices, which is forecast to grow to 5% of new commercial construction in North America by 2022
Impact of Labor Market
- Pre-Covid labor issues continue as skilled workers have dropped out of the industry or joined new industries, with in-demand jobs requiring training and experience
- In addition to the growth of labor-saving technology and construction practices such as modular construction, labor saving integrated systems and products are also seeing greater adoption, such as roof coatings, panelized products, integrated exterior barrier and sheathing systems, and unitized curtain wall glazing
Sustainability and Environmental Drivers
- New administration’s prioritization of reducing carbon emissions to renew initiatives for energy efficiency products and programs, with an emphasis on sustainability
- Likely adoption of higher environment-focused building regulations and codes to increase the impact of lower carbon footprints on the value of commercial real estate
- Potential for boost to rooftop solar panel market
Ducker’s Building & Construction team is at the forefront of key trends impacting the industry. Visit our Insights page for the latest insights and implications for global business, or contact us to connect with a team member.