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As access to Covid-19 vaccines increases, new cases decline, and restaurants, entertainment venues and offices move closer to pre-pandemic normalcy, the construction industry must prepare for a potentially $ 35 trillion boom to meet pent-up demand and demographics that will open up new geographic markets in the next few decades. Before getting into the good news, however, nationally recognized attorney and construction consultant Barry B. LePatner argues that contractors face important financial constraints, either caused or exacerbated by the Covid-19 pandemic.
LePatner advises several of the country’s leading builders and developers on construction projects and is the author of two highly regarded books on the construction industry and our country’s failing infrastructure. Some of the issues the construction industry needs to address to partake of the imminent recovery of the broader economy after the pandemic include:
- Pricing: Construction pricing depends heavily on supply and demand. As the construction market slowly returns to pre-Covid levels, many contractors are pursuing riskier projects at low fees to keep their workers busy. If contractors continue to choose these low profitability projects through 2022 and beyond, the construction industry recovery will be delayed as the overall market heats up.
- Skilled workers shortage: The widespread shortage of workers in the craft sector has been a burden for the industry for several years. The industry needs to find ways to invite and train new employees – including the Biden Infrastructure Plan, which is investing billions in training new industrial workers – not only to meet today’s bottleneck, but to develop a new generation of workers to handle the rising To meet demand for the rest of the industry decade and beyond.
- Increased material costs: Before Covid, up to 30% of all materials and products used in many projects were bought abroad. The prices for many building materials have risen dramatically in the past 18 months. The pandemic disrupted the supply chain based on more than two decades of cheaper labor and material costs secured by globalization. As a result, many manufacturers are building new factories in the United States. When completed in the next few years, our domestic supply chain will be more reliable, but product costs will rise at least 20% above existing prices.
- Adoption of new technologies: Contractors have been slow to adopt advanced technology to achieve greater efficiency during construction. Most firms have not been able to allocate the funds to invest significantly in hardware, software, and training to improve design skills and productivity gains. Furthermore, few commentators in the field suspect that we will soon see a dramatic upswing in this direction.
President Biden’s recently released infrastructure proposal, built on consensus among Democrats and Republicans in the country’s capital, highlights several key factors attributed to positioning the US construction industry for a decade of unprecedented growth. Historically low interest rates, growth in the healthcare sector and demographic change, together with this legislative proposal, signal a new construction boom.