U.S. CONSTRUCTION MARKET OVERVIEW Q4 2021
By Daniel Pomfrett, National Director of Forecasting + Analytics
In our last report, we said that the central question facing the construction industry was when — not if — things would return to normal. The last few months seem to have provided an answer: sometime in 2022. The next year is expected to be a return to form for the construction market in most of Cumming’s office locations.
Both the spike in activity in 2021 and the drop in 2020 can be explained by COVID-19. Projects that were cancelled or postponed in 2020 due to the pandemic resumed construction in 2021 as the construction market stabilized. Furthermore, a combination of shelter-in-place orders and record low interest
rates created the ideal conditions for a boom in the residential sector. These two factors caused the market to be artificially subdued in 2020 and artificially elevated in 2021. Moving into
the new year, we expect pre-pandemic trends to take over.
Markets that were declining before the pandemic should begin to decline again, and growing markets are expected to continue their growth. COVID-19 still poses a risk, but thanks to vaccines it is more understood and can be accommodated for.
Final construction employment figures have been released for the last quarter and are showing a steady increase in the number of workers. Some markets have added to their workforce, while in others employment remains well below pre-pandemic levels.
This is generally due to some markets lifting restrictions faster than others.
Commodities prices remain well above their 2019 levels, although they are beginning to relax. Most notably, the price of lumber jumped by almost 200% early in the year, briefly putting it in league with precious metals. The exact cause of these increases varies by commodity — and ranges from environmental regulations to speculative buying to a lack of shipping containers — but is generally due to a mix of increased demand and
constrained supply. Eased restrictions mean that demand has recovered much faster than suppliers can produce. Many of these issues are likely to persist into the new year, but we expect pricing to at least stabilize in early 2022.
The Omicron variant of the coronavirus has re-ignited fears of restrictions. It is far too early to say whether these concerns are valid, but initial figures indicate that it may be less severe (albeit more contagious) than other variants. Confidence in the market
remains high, as vaccinations make COVID-19 a risk that can be planned for and mitigated, like any other risk to a project’s timeline. For those in the industry, we would again like to sound a note of caution on volatility, as we continue to see markets
change on an almost daily basis. The timing of any project will be important, at least for the next few months.
Overall, the outlook for next year continues to be positive. 2022 is unlikely to be as active as 2021, but things are expected to return to normal. Old trends are likely to take over as pandemic-related projects wrap up, and this will make contractors less likely to be caught off-guard by sudden changes in the market.