Construction outlook ‘pretty positive’ going into 2021 – Plastics News

Single-family homes are becoming more popular with millennials. Offices and multi-family housing are falling out of favor. Warehouses are in big demand. And factory conditions are improving for robots.

The effects of the pandemic on the construction industry are accelerating some trends as new ones emerge, economic analyst Chris Kuehl said Oct. 6 during his keynote presentation at the 2020 virtual fall conference of the Fenestration & Glazing Industry Alliance.

"It's difficult to make grand national predictions about construction because it's so local, but the promise for construction is pretty positive going into 2021," said Kuehl, the managing director of Armada Corporate Intelligence, a Lawrence, Kan.-based consulting firm.

The commercial side of the construction industry "has done relatively well collectively" thanks to demand for new warehouses all over the U.S., according to Kuehl.

"The growth area right now is warehousing," he said. "As supply chains have changed, people are focusing more on the warehouse and inventory. That's something they haven't had to do for really the last two decades. The just-in-time system was by far the popular system, but it's now creaking a little bit because it's hard to count on that global supply chain."

Manufacturers also are constructing new facilities as they automate more operations.

"This is the irony," Kuehl said. "Back when it was just people working in a manufacturing facility, it could be dirty, un-air conditioned and nasty. The people will deal with it. Robots and computers don't like it and they refuse to work. So the manufacturers have to update their buildings to accommodate the robots."

Also in the commercial sector, Kuehl expects office construction to decline or be flat.

"We know many people will stay working from home. We also know the frustration level of working from home has begun to rise," he said.

On the residential side, spending on remodeling will continue to grow into 2022, possibly at a faster rate, Kuehl said. Many homeowners are staying put and taking on improvement projects, including work-from-home updates like new doors and energy efficient windows.

"Energy conservation is wrapped all around what you do and it's one of the things that could see a real boon," Kuehl told fenestration trade group members.

Those who are moving are leaving the bigger cities and taking advantage of low mortgage rates. They don't have to commute to work anymore and can live in a more remote area.

Urban life also is losing its charm for millennials once drawn to U.S. cities to be near a variety of eateries, entertainment and cultural events. Kuehl said these kinds of services used to make up about 60 percent of consumer spending, particularly for the Gen X and Millennial categories.

"They don't buy things as much as they buy experiences and travel and that's what got cut off. If you're a consumer used to spending your money on restaurants, traveling and concerts, well none of that's allowed now," Kuehl said.

Some millennials are sitting in one-bedroom studios in cities seeing greener grass in the suburbs and beyond, he added.

"Millennials are getting more interested in single-family homes, which will boost that sector quite a bit," Kuehl said. "They have been the most resistant generation to single-family homes but they're starting to move of out of the multi-family preference."

Multi-family housing starts will begin declining, he added.

Kuehl said he planned to talk about what a post-COVID economy will look like when he was named this summer to be the keynote speaker.

But with 34 million cases worldwide and the death toll exceeding 1 million, he focused more on what 2021 might bring.

"We're now working in highly unusual circumstances and its having a series of impacts on the economy," Kuehl said.

He expects higher unemployment to be around for a while.

"It has increased rapidly. It will remain high indefinitely," he said.

He also said business and personal bankruptcies will increase, adding the data is getting worse by the month and will be highly concentrated in the restaurant, hospitality and travel industries.

"This wasn't a financial sector collapse as in 2008-09," Kuehl said. "It was imposed and because of that it started abruptly and could conceivably end abruptly. We're not sure at this stage how it ends. There's lots of conjecture. Do we have to wait for a vaccine to be distributed? Do we have to wait for the pressure on hospitals to be reduced? Do we have to wait for some sort of herd immunity."

And even when a vaccine is available, when do the restrictions change, he wondered.

"Do we wear buttons that say I've had the vaccine, I don't need to wear a mask," Kuehl asked. "It's going to be difficult to go through that to say the least."

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Construction outlook 'pretty positive' going into 2021 - Plastics News