The impact of the COVID-19 outbreak on the construction industry, like every other industry in the U.S., has been dramatic. Its effects have been particularly notable in commercial and institutional construction, where everything from mandated shutdowns, supply chain issues, and the overall economic downturn have influenced what contractors have experienced.

In order to take a closer look at the breadth of impact and long-term consequences of the pandemic, Dodge recently conducted a brief survey of contractors shortly after the pandemic struck in late March  and another in April, which was conducted for the USG+US Chamber of Commerce Commercial Construction Index report and was published in June.

Based on a combination of these supportive findings as well as through ongoing discussions with leaders within the construction industry, it’s clear that the shutdowns and delays due to the pandemic were not fully experienced until the April timeframe. While in late March about two thirds (67%) of contractors reported that they were currently experiencing project delays, 87% of contractors reported experiencing project delays a few weeks later.

Likely due to COVID-19, far more contractors expect their revenues to decrease and far fewer expect an increase than typically seen in the data gathered over the last three years. Expected changes to profit margins were similar, with those expecting increasing profit margins declining by nearly one half from 31% to 15% between the first and second quarter, and those expecting a decrease increasing six-fold from 3% to 18%. Confidence in the ability of the market to supply sufficient new business opportunities in the next 12 months also fell, with those with high confidence in the market plunging from 54% in the first quarter to 16% in the second.

Clearly, contractors expect less work, but unfortunately, they also still expect to have issues with skilled worker shortages. Until the pandemic hit, this was the biggest challenged faced by the industry, and the sudden downturn in work might have lessened that stress on contractors. Unfortunately, though, even with hiring expectations down considerably in the second quarter, nearly half of contractors still expect a high level of difficulty in finding skilled workers, and another 43% expect moderate difficulty. Despite the potential for decreasing workload, most contractors still expect to struggle to find the workers to complete their projects.

As of April, contractors were also less clear about the likelihood of projects getting financed in the future. While nearly half expect the availability of financing for owners to remain the same or increase, 38% think it will become more difficult. How this plays out will be a major factor in determining the degree to which the construction industry as a whole will be affected, and so far, the industry is clearly not sure what will happen.

The contractor responses also reveal how long and how severely they expect to be bearing the brunt of the pandemic. Delays were expected to continue well through the fall, and many contractors also expected the share of impacted projects to shrink. In April, the average share of impacted projects was 40%, but within three months, that share was expected to drop slightly to 35%, and by the fall, it was expected to be 23% of projects. As regions have continued to reopen, these expectations seem to be bearing out so far, but of course, they are dependent on major shutdowns not returning and on a supply chain that can keep up with the demand.

On the flip side, two areas have remained relatively strong in the wake of COVID-19. Backlog levels reported in the second quarter were relatively consistent with those in previous quarters, with the ratio of average current and ideal backlogs only dropping three points from 76 to 73. In addition, the percentage of contractors experiencing product shortages (55%) was also quite consistent with previous quarters, which have been around 50%.

In response to the pandemic, the construction industry has also had to take steps to transform their overall processes. Nearly all contractors have changed their work procedures currently to increase social distancing, with many expecting some of the adjustments to safety procedures and work processes to continue even after pandemic concerns have receded. Another area that is expected to become more common permanently is staff working remotely, as construction companies have seen their productivity continue when their office staff has worked from home. Remote meetings, whether with project team members or clients, are expected to become more common, and contractors also predict that they will make sure their contracts cover them better for these kinds of events in the future.

Although this data offers a snapshot of the impact COVID-19 has had on various contractors and there is promise in the short-term view, the true long-term effects of the pandemic on the construction industry are still to be seen and likely won’t surface for some time. Amidst economic uncertainty, increased risk, and evolving onsite health and safety requirements – contractors will continue to face these ongoing challenges and must remain as agile and strategic as possible in order succeed within the new future.