State of the Construction Industry: January 2021 Roundup

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A new year, new government leadership and new outlooks are in focus for construction in January. This month we take a closer look at some of the initial impacts for contractors and what the future may hold.

How Biden’s Administration Could Impact Construction:

The White House - January Construction Roundup
With a new president in the White House, a number of changes are coming that will impact contractors.

It’s only been roughly a week since Joe Biden’s inauguration as the 46th president of the United States, but already he’s issued a flurry of executive orders and kick-started initiatives that could have wide-ranging impacts on the construction industry. Here’s just a few examples:

  • Terminated construction and funding for the U.S.-Mexico border wall project;
  • Ended all effective construction of the Keystone XL Pipeline project ;
  • Initiating plans for more stringent environmental protection controls, including re-submitting the United States to rejoin the Paris Climate Accord;
  • Put together a cross-functional team to address the COVID pandemic, including a $1.9 trillion relief plan and issuing a directive for a federal mask mandate for all federal properties and employees — strongly encouraging state and local leaders and businesses to follow suit;
  • Strengthened workplace discrimination protections and calling for clearer paths to citizenship for undocumented immigrant workers, though executive action on this may be delayed;
  • Toughening ‘Buy American’ rules for federal government purchases, including businesses and federal contractors that do work for the government;
  • Called for — as part of the COVID relief plan initially — the raising of the federal minimum wage from $7.25 to $15 an hour; and
  • The new President is expected to soon revisit the Tax Cuts and Jobs Act that could boost the top corporate tax rates from 21% to as much as 28% - though he has suggested that a number of new business incentives could offset much of the additional tax burden.

Construction Starts Fall, But Confidence in Rebound Remains

New construction starts could continue to see a decline in 2021, though infrastructure projects could see an upswing.

Total construction starts dropped 10% in 2020 to $766.3 billion - the lowest mark in five years. COVID clearly played a lead role in the drop as businesses across the world had to pause or significantly adapt during the pandemic. Reports indicate that nonresidential construction building is expected to see continued declines through 2021 as well. A 5.7% decline in construction spending in 2021 has been projected by the American Institute of Architects, though by 2022, it’s expected that growth of at least 3% could occur. Despite the figures and projections, there’s still high levels of confidence in the industry - especially among civil contractors. A recent report from Dodge Data & Analytics noted that more than half of civil contractors were highly optimistic about their business prospects over the next 12 months, buoyed by expectations of significant infrastructure projects coming to fruition in the year ahead. 

The Takeaway: Until COVID can be more contained, business in all sectors will see extended challenges. The good news for construction is that there appears to be no shortage of work in the future. This does put extra demand though on contractors to get projects done quicker and more cost effectively in order to meet modern demand and backlog. Yet another reason why we’re seeing so many contractors shift toward modernizing their operations — taking advantage of slow downs to scale their business for an expected boon in the near future.

A Key Infrastructure Push

New York skyline - infrastructure spending package
Cuomo's plan calls for significant transit and infrastructure upgrades to Midtown Manhattan as well as both JFK and LaGuardia airports.

While federal infrastructure spending packages continue to be debated, New York Gov. Mario Cuomo is moving ahead with his own 2021 infrastructure plan. The $306 billion spending plan would include $51 billion in transit redevelopment of Manhattan's Midtown West area and the continued modernization of New York airports and other transportation projects. The plan also earmarks billions of dollars for upstate New York transportation projects. Cuomo called the plan, "the largest, most ambitious plan put forward by any state in the nation.”

The Takeaway: This is a key indicator that 2021 will be the start of major infrastructure improvements throughout the United States. We’ve seen a number of smaller spending packages create new opportunities for contractors across the country in recent years, but between federal and state spending bills — if approved — we could see the floodgates of new work opening. Of course, the best of these projects will go to civil and heavy highway contractors that can prove they are poised to handle the workloads and meet modern demands.

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Posted By

Andy is Marketing Content & PR Manager at Viewpoint. He has worked in the construction software arena since 2011. Previously, he netted multiple awards as a newspaper and trade media editor.