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COVID-19 Pandemic to Continue to Affect Commercial Construction in 2021

by Freedonia Industry Studies

January 26, 2021

The COVID-19 pandemic affected the commercial construction market in a number of ways in 2020:

  • Many projects ground to a halt as funding for projects – both from banks and businesses themselves – evaporated.
  • Work at many sites slowed as contractors adapted to the new realities of social distancing, more frequent cleaning of equipment, and materials shortages.
  • Construction professionals shifted operations to set up emergency medical facilities, testing sites, and temporary housing for healthcare workers.

Overall, however, commercial construction activity contracted in 2020, as new realities – working from home instead of commuting to the office and shopping via Amazon rather than a trip to the mall – meant that many projects were stopped or canceled. This begs the question: what will the market look like in 2021?

Two articles indicate that commercial construction is expected to have another down year in 2021.

The first reports that for many commercial construction segments, 2021 will bring further contractions in activity. Declines will be especially pronounced in such sectors as:

  • office buildings
  • hotels
  • amusement and recreation
  • schools
  • retail

None of this should be surprising to readers of this COVID-19 Economic Impact Tracker series. With fewer people working in the office, fewer office buildings will be needed, even as those that exist will likely be repurposed or redesigned to fit our changing work world. The prevalence of Zoom meetings has eliminated the need for business travel, and family vacations have become “staycations” for the near term. Both of these trends have impacted the hotel industry. Indeed, the best growth opportunities are expected in healthcare and warehouse construction, as medical facilities expand to treat the needs of COVID and other patients and firms expand distribution capacity to account for a surge in packages.

A second article reports that construction of skyscrapers – which fell in 2020 – may be subject to a similar decline in 2021. While some are predicting a rebound in tall buildings construction in 2021, others note that the same factors that affected construction in 2020 – reduced need for office space, higher interest in suburban living, concerns about project funding – will not disappear in 2021, and skyscraper construction may face more challenges going forward.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.

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