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The Effects of the Pandemic on Construction Supply and Demand

17 Mar 2021, Posted by F.A. in News
The Effects of the Pandemic on Construction Supply and Demand

For the last year, COVID-19 has been impacting communities across the world and cases are continuing to rise in some places. Despite many governments and companies’ responses, there are many industries still seeing the impacts of the virus. Construction is no different and has a number of unique challenges. Construction companies have been tasked with building hospitals in unprecedented periods to donating PPE and equipment, playing an important role in responding to the crisis. As 13% of global GDP, construction could help to offer labor and economic stimulus in the face of future challenges.

However, that is not to say that construction hasn’t suffered in some ways due to the pandemic. Many construction sites have had to shut down, faced operational restrictions, or had to cope with interrupted supply chains. Activities that were once simple, like finding concrete forms for sale, may take more acumen in this environment. This has meant that construction companies have to carefully determine their next steps, taking advantage of new opportunities while being cautious of limitations.

How COVID Has Impacted Industry Dynamics

While we are currently seeing a number of short-term consequences of the pandemic to the construction industry, it is important to anticipate the long-term consequences that will persist even after the virus is under control. Early estimates say that a result of long-term lockdowns and the sustained economic impact could mean the economy is not in recovery mode until 2023. With this in mind, construction is also a more volatile industry than the overall economy; reductions in economic activity often result in less demand for commercial and industrial facilities and lower construction costs like plywood for sale, with ambiguity creating less need for new buildings and a lack of consumer confidence leading to less residential demand as well. Overall, construction activity is highly tied to GDP growth, and even a downturn that is not directly related to real estate will reflect this.

In addition to demand concerns, supply has been impacted, particularly as construction workers (both migrant and domestic) have trouble reaching construction sites and have to contend with strict protocols when they are working. Many of these protocols, while necessary, reduce productivity. With labor supply being affected, supply chains have also been interrupted with suspended production and distribution.

Early Signs of Disturbance

Prior to the COVID-19 pandemic hitting, there were some performance concerns in the construction industry, with stagnant productivity, low digitization, and low profitability as long-standing concerns. As a result of increased sustainability regulations, labor scarcity, and newly available materials, the industry is learning to innovate and go digital in ways it previously had not.

There is some belief amongst industry experts that these disruptions will fundamentally change the size and distribution of industry value polls, and that newcomers will need to adapt to more modern strategies and business models.

Trends for the Short- and Long-Term

COVID-19 has so far seemed to exacerbate some of these existing changes to the industry. This means that in addition to short-term trends in direct response to the pandemic, we should expect to see long-term trends accelerate in response to these changes.

Short-term trends to watch for include the following:

• Unprecedented public-relief packages may help aid rapid recovery and lead to public-investment programs, funding infrastructure.
• As many organizations shift to remote work, areas of construction may begin to rely more on digitization. Designers and engineers may rely on digital collaboration tools to work with contractors, and online channels to monitor employees have gained some popularity. These tools may also be implemented to better manage the supply chain, like finding concrete forms for sale, managing scarce resources, and monitoring cash flow.
• Supply chains may begin to rebalance toward resilience, versus efficiency as contractors build inventory to ensure they have critical materials and long-lead items.

Longer-term trends may include the following:

• In order to establish economies of scale, many industry players are looking to consolidate and support more investment in IT, talent, R&S, and technology. This consolidation can bring some resilience to suffering balance sheets.
• Vertical integration is already being implemented as a way to increase efficiency and standardize design and execution. In a post-COVID scenario, this may return to more reliance on direct labor as a way to build resilience.
• Before the crisis, the industry already faced a shortage of skilled labor. With more restrictions on cross-border movement and physical distancing, this can become more acute. Construction companies may turn to more digital tools and more R&D invested to speed up these elements of design.
• More off-site construction may become common to expand capacity and improve quality and speed.
• As governments stimulate the economy, these packages may include measures to increase sustainability, leading to a demand for new forms of construction.

Like any business, construction will likely look different after the COVID-19 pandemic begins to ebb. Industry leaders are concerned about everything from labor to regulation to finding the best concrete forms for sale and should navigate the crisis based on trends and data.