Despite occasional economic challenges, the construction industry has, over the years, proven to be arguably the most resilient and profitable sector. As a whole, the U.S. construction industry is expected to be worth $1.8191 trillion by 2024. This is after experiencing a compound annual growth rate of 8.5%.
A more in-depth look shows that commercial building construction grew at a CAGR of 10.2% between 2015 and 2019. For investors and other industry stakeholders, medium and long term projections are exciting. However, due to the COVID-19 pandemic, the sector has been one of the hardest hit.
As with previous recessions, the California construction industry has been greatly affected. This is due to how vibrant the sector usually is. Any time there’s uncertainty, investments in construction decrease. Though it has proven to be fairly resilient over the last six months, it is the last months of the year and the onset of 2021 that are concerning.
Read on to find out how the pandemic has affected Los Angeles’ construction industry and what to expect in the coming months.
Impact of COVID-19 On Commercial Construction in Los Angeles
As a whole, the U.S. commercial construction sector has been significantly disrupted by COVID-19. This is even though it qualified as an essential industry. Due to the challenges and project cancellations and postponements due to uncertainty, 975,000 construction jobs were lost.
Though Nonresidential commercial construction in Los Angeles has been affected too, the sector has proven to be more resilient compared to other cities.
Lockdowns and Social Distancing Requirements
Some of the key measures taken to reduce the spread of COVID-19 include curfews, lockdowns, stay-at-home measures, and social distancing. Though the construction companies were allowed to continue operating in Los Angeles, doing so at full capacity was near impossible.
Due to the safety guidelines, the number of workers that could be onsite reduced significantly, thus slowing down construction. With supply chains closed or at half staff due to international and local travel restrictions, ordering and receiving materials for job sites has also become a challenge.
Cutbacks in State and Local Budgets
As business activities slowed down, the pandemic proved to be as much an economic one as it is a health-centric one. State and county revenues significantly reduced. This led to massive budget cuts for many programs in the L.A. 2020/21 county budget.
With a significant proportion of commercial construction projects funded through public spending, it may take at least one year for some projects to resume.
Technology in Construction
Along with the challenges that the construction industry in L.A. has faced, COVID-19 has also brought one significant benefit. The sector has been largely reliant on processes that have been used for a long time. With the challenges brought by the pandemic, there’s been a spike in the use of technology, which will play a major role in the future.
Some of these technologies include:
- Virtual Reality and Augmented Reality- With travel and social distancing restricting access to construction sites, these technologies have become invaluable. Architects, project managers, inspectors, and engineers can coordinate with personnel onsite remotely to avoid construction delays.
- Artificial Intelligence and Digital Devices- To ensure social distancing regulations are observed and workers’ safety, construction companies have turned to the use of video, devices, and A.I. Along with safety and compliance, doing so has helped increase productivity.
Such technologies have accelerated the adoption of technology in the Los Angeles construction sector. Devon Copley, the CEO of Imeve, reported a 300% increase in web and phone traffic from construction companies seeking technological solutions. With the benefits they offer, technology in construction is fast becoming a necessity rather than a luxury.
Cancellations and Postponements
Due to the uncertain market and economic conditions brought about by the pandemic as well as the guidelines to control it, some construction projects were halted. Most of the projects in 2020 were either postponed or canceled. The sectors that have been significantly affected by the epidemic include education, hospitality, and manufacturing construction.
Our predictions for Los Angeles Construction in 2021
As with any time of uncertainty, it is important to proceed with caution if you are in the Construction Industry in Los Angeles. However, current trends and projections for the construction industry in 2021 paint a promising picture. Even as you take caution, it is crucial to bear in mind that the California and Los Angeles Commercial Construction sector is set to rebound and exceed expectations for 2021.
In fact, with the market stabilizing and economic recovery on course, some large construction projects are already in the pipeline, suggesting there’s cause for optimism. To capitalize on the expected upturn, you will need to focus on insight-driven construction.
Build Analysis is a company that offers pre-construction analytics and construction management services to address your unique challenges and deliver success. Contact us today to use data-backed strategies and optimize your construction efforts.
