Experts Predict More COVID-19 Construction Delays

By Karen L. Edwards, RCS Editor.

The authors of this new report by Moody’s Analytics site three reasons why this economic downturn is different from any other.

Construction delays are not new. Many new construction projects experience delays for any number of reasons, including weather, change orders, material delays, worker shortage and now, a pandemic may slow work down due to heightened restrictions and safety guidelines.

A new report, released by Moody’s Analytics examines construction lifecycles and total completion times in different areas of the country to provide a good perspective of delays under normal circumstances and how they can vary depending on economic conditions.

While 45 percent of industrial project experienced delays during the period of 2002 – 2019, the study found other sectors were much higher in experiencing delays, including office (73%), retail (79%) and apartments (82%).

Now that we are dealing with the COVID-19 pandemic, the authors say the current economic downturn is different than a traditional downturn for three reasons:

1 - Stay at home orders

Governments across the US issued stay-at-home orders that were implemented in various ways, with each state deciding what activities were deemed essential. Construction in many states was allowed to continue, but some states forbade it. Previous downturns were caused by “asset bubbles bursting or credit conditions worsening,” write the authors.

2 – Global impact

The effect of the pandemic is not limited to the U.S. alone, but has affected global supply chains. Material production and shipping delays can lead to the delay of projects.  In states where construction is deemed essential, other activities such as real estate services, appraisal and underwriting were not operational, leading to delays in releasing project financing.

3 – Uncertainty

As of this writing, we still don’t have the answer to whether once you have COVID-19 and recover, does this mean the person is now immune? Or will we see a second wave or resurgence of the disease? The report suggests that without a “credible and reliable treatment and vaccine made widely available, economic activity will remain curtailed.”

The new construction team at Moody’s has been tracking projects since mid-March in specific metro areas that put construction on hold including New York, northern New Jersey, Philadelphia, Detroit and San Francisco. They infer that the longer the amount of time in between the stop and the restart dates in these areas could increase the likelihood of more delays.  

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