Many contractor balance sheets are reporting 2020 revenue numbers that normally reflect a strong economy and healthy industry. That seems to be a mixed message when we know that COVID-19 has devastated the financial stability of many businesses, institutions and local and state governments. To make sense of this, it is important to understand that construction projects completed this year were bid, negotiated and won in 2019 or earlier.
Even though 3 out of 4 contractors across the country experienced project delays or cancellations due to COVID-19, being deemed an ‘essential’ industry was critical in allowing many construction projects to continue over the last year – some were even completed in record time because of reduced occupants in schools, vacant corporate office buildings and fewer vehicles on the road. The construction industry was also one of the largest recipients of Payroll Protection Program (PPP) loans, allowing contractors to retain employees and providing an economic boost to counter balance increased project costs and project delays.
The common storyline from contractors about the 2021 outlook is concern over the decreasing backlog of work as their customers are uncertain about future building plans. National and local politics, increasing COVID-19 cases that make a return-to-work or school soon unlikely, and concerns about an economic recession all contribute to this uncertainty. It is no surprise that the collective prediction of economists is that the impact of the COVID-19 pandemic will be significant to both public and private sector construction because select industries were essentially shut down (manufacturing, retail and hospitality among them) and tax revenue, critical to public project funding, has decreased.
While multi-family and single-family residential construction has been strong throughout 2020, all major categories of nonresidential construction spending have decreased since February. Power, distribution centers and data centers are markets forecasted to have positive increases in 2021. Education construction is a mixed story with declining higher education construction due to decreased revenues for the UW System, but K-12 construction will likely be strong as Wisconsin voters passed 85% of school referendums on the ballots in November.
As Governor Evers prepares the budget that will be presented to the Legislature in February, it is critical that there be a focus on continued investment in Wisconsin’s infrastructure. Even throughout the pandemic when fewer residents were on the road, we realize how essential transportation is to our everyday life – keeping store shelves stocked, allowing grocery and meal deliveries to continue and stocking Amazon distribution centers. We also realized how essential our fiber-optic infrastructure is due to remote work and learning demands, and investments to improve fiber-optic infrastructure, especially in rural Wisconsin, must continue.
Ongoing investment in Wisconsin’s infrastructure is essential for recruiting and retaining businesses in our state and to post-Covid-19 economic recovery. That investment is also crucial in providing financially rewarding jobs to the more than 125,000 construction industry employees that call Wisconsin home. Wisconsin’s construction industry is essential to the health and success of our state and we welcome the challenges and opportunities that 2021 will bring.
The Construction Business Group promotes and protects the construction industry. They ensure fair contracting laws are followed on public construction projects. They work co- operatively with contractors, employees, and public entities by educating them on fair contracting laws, monitoring projects for fair contracting compliance, and identifying and helping to resolve compliance issues.
By, Alex Paniagua