Michigan construction: Where building could boom in 2021

Michigan
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GRAND RAPIDS, Mich. (WOOD) — Hotel and lodging construction in Michigan is expected to take the biggest hit this year, according to a new outlook released by the Associated General Contractors of America.

Industries hit hard by the pandemic are expected to see the largest decline in construction. Of the 29 Michigan contractors surveyed, 82% of contractors expected to see a drop in dollars for lodging projects. Private office projects came in at No. 2 for project funding losses, followed by retail.

Michigan firms are coming off of a tough 2020. Among surveyed contractors, 55% reported project cancellations last year and 59% said some projects were pushed into this year.

Nationwide, the majority of firms surveyed through mid-December expected it to take at least six months before their business returned to pre-pandemic levels.

WORKFORCE WOES

AGCA Chief Economist Ken Simonson said since the pandemic revved up in April, construction industry hiring has split, with residential contractors continuing to grow their workforce and non-residential contractors stalling hiring from April through July. Although non-residential contractors have started slowly adding workers, Simonson says several hundred thousand employees in that sector are still out of work.

“I’m worried more and more non-residential firms are going to have to shrink their workforce going forward,” Simonson added.

The nation’s higher jobless rate isn’t translating into a hiring boom for contractors.

“Too few newly unemployed are considering construction careers,” said Simonson.

In Michigan, 59% of firms surveyed in December said they were having a hard time filling jobs in skilled trades.

KAI Enterprises CEO Michael Kennedy is worried the industry’s limited staffing won’t be able to handle the industry’s eventual rebound. Because training programs stalled during the Great Recession, he says there aren’t enough experienced workers now to replace the skilled tradespeople on the verge of retiring.

UNEXPECTED COSTS

Industry leaders in Thursday’s meeting bemoaned the project delays and unexpected expenses created by COVID-19.

The president of a Kansas City construction form said her business has spent $150,000 to $200,000 so far for testing, paying workers in quarantine, modifying offices and vehicles and purchasing masks.

Supply chain issues are also leading to unpredictable pricing in materials. The president of a Florida construction company said asphalt and steel cost significantly more.

In Michigan, 79% of surveyed contractors reported projects taking longer than anticipated and 62% said project costs were higher than expected because of the pandemic.

WHERE BUSINESS MAY BOOM

There are some bright spots in the outlook, including a predicted uptick in spending on medical construction projects.

“As people try to stay away from hospitals or they’re not even allowed into hospitals but they need medical care, or they’re going to need long-term care because of side effects from COVID, and also as people look for alternatives to nursing homes, that’s going to spur demand for a variety of kinds of other health care facilities,” said Simonson.

He also expects persistent demand for warehouses, thanks to the rise of online shopping.

“The demand to have things delivered to our homes and to get it the same day or at least as soon as possible is going to continue to push firms, saying, ‘We need to have more distribution facilities closer to residences.’ Some of those will be new, but some will be repurposing abandoned big box stores or portions of malls that shut down.”

AGC says more federal funding and investing in the country’s infrastructure could improve the industry outlook. The organization says it will be launching a nationwide recruitment effort to help grow the construction workforce.

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