Construction Outlook 2021

The economy remains resilient as fresh stimulus combined with multiple vaccines provide hope for American consumers; marginal increases in total retail and durable good spending provide an optimistic sign that spending has recovered during 2020 despite tremendous financial difficulties for many. Many suppliers adapted to their circumstances last year by shrinking inventory; we expect reduced inventories to remain moving forward as business leaders keep their companies agile. As the vaccine continues to be dispersed the unemployment rate should return to a healthy ~4%. We expect wages to remain constant throughout 2021 as businesses recover, however, there is the possibility that wages rise as businesses compete for workers returning to the labor force.

Residential construction makes up more than half of all construction spending. Single-family home prices have increased substantially as demand outpaces supply and the cost of materials rises. We expect supply to increase in the later half of 2021 as the vaccine is distributed and families feel comfortable moving again. Reduced risk tolerance and a volatile investment environment has led many multi-family developers to halt future projects, a trend expected to continue through 2021 as investors seek stability. 

Several “mega projects” worth multiple billions have dollars have largely benefited the commercial construction sector. Pictured is Tesla’s €4bn, Berlin base, giga-factor expected to be completed in summer of 2021. These projects are expected to continue to boost P.I.P. value through out the coming years. While some of these mega projects involve public infrastructure, there is skepticism over future infrastructure spending as state and local governments seek to cut budgets; however, Congress is expected to take up a large infrastructure bill in 2021.