Several different factors will influence the construction industry this year. While there are certainly some reasons to be optimistic about the outlook for the construction industry in 2021, many contractors could experience challenges and adversity this year, as the ongoing pandemic continues to negatively affect the demand for contractors and subcontractors. Here are some trends that will impact the industry and the types of construction that are in demand right now.

Overall Decrease in Demand

During the last quarter of 2020, investments in commercial construction increased by an annualized rate of 3%. In contrast, investments as a whole increased by 4% during the same period. This coincided with a decrease in demand for commercial contractors. Contractors are also using fewer sub-contractors in their work. On the one hand, subcontractor field has become more competitive. On the other hand, many general contractors have been performing tasks in-house, when they would usually use a subcontractor, to retain closer control over projects.

Demand for Certain Categories Will Increase

While overall demand may be stalling, demand for certain types of construction continues to rise or remain steady. Malls, hotels, and office buildings are struggling right now. Affordable housing, in contrast, is one area where demand is increasing. Millions of Americans have lost jobs because of the pandemic or experienced cuts in their hours, which has triggered an affordable housing crisis. The demand for infrastructure projects will also likely rise in 2021. Although the demand for new construction in some areas like lodging and office construction is decreasing, the demand for renovations in these areas may increase as businesses work to make their buildings safer for employees and guests in light of COVID-19.

Optimism about Infrastructure Projects

Some observers are optimistic about infrastructure projects that could arise over the course of the year. President Biden is working to enact a multi-trillion-dollar infrastructure bill as part of his Build Back Better platform, which could lead to the creation of numerous infrastructure projects across the country, including possible renewable energy, transportation, and civil works projects. We could also see new projects related to constructing and relocating manufacturing facilities and distribution centers as the government works to disseminate vaccines and PPE to combat the ongoing pandemic.

The construction industry has not yet fully recovered from the economic downturn of 2020. Subcontractors and commercial contractors are especially struggling right now, as the demand for both commercial construction work and subcontracting work has decreased. Yet, there is still reason to remain hopeful. Infrastructure projects on the horizon could benefit contractors and help increase investments into construction.

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