Colorado contractors see tougher year ahead as backlog evaporates
A backlog of work helped Colorado’s construction industry stay afloat through 2020, but that surplus is drying up and contractors are expecting there will be far fewer projects for them to bid on this year because of disruptions from the pandemic.
“Most contractors expect demand for many types of projects to shrink during 2021. Most firms believe recovery is many months away,” said Stephen Sandherr, CEO of the Associated General Contractors of America, on a video call.
Retail, office, lodging and higher education are the four areas where Colorado contractors expect the dollar value of projects to be less this year than in 2020, according to a survey of 64 Colorado contractors included in a larger national survey conducted by the AGC.
About three-quarters of Colorado contractors expect fewer retail projects this year compared to last, while two-thirds expect fewer office projects to come to bid. The outlook was also dour for lodging, higher education, highway and transportation projects, and public buildings in general, aside from federal work.
Contractors held out the most hope for other health care projects, which includes clinics and screening facilities; water and sewer projects; warehouses; apartments and manufacturing. Residential contractors, other than multi-family, were not included in the survey.
Ken Simonson, chief economist with the AGC, said the pandemic has delayed completion times and driven up costs across the board. Contractors have largely avoided the wide-scale outbreaks seen in some industries, but that required staggering and spreading out work crews rather than having them work on top of each other. Factory closures in March and April have also disrupted supply chains, lifting costs for an array of items, especially lumber.
Businesses and governments, faced with a more uncertain economic outlook, have also pushed back projects scheduled for 2020 into 2021, or dropped them entirely. In Colorado, 72% of contractors surveyed said they had a 2020 project pushed into 2021, while 55% said they had 2020 projects canceled and not rescheduled.
That trend is continuing into 2021, with 26% of contractors reporting that a project scheduled to start in the first half of the year was pushed back, and 14% saying a first-half 2021 project has been canceled.
Even though they are under financial duress, a majority of construction firms don’t plan to reduce their workforce this year. About 37% expect to add staff, while 32% plan to hold steady and 31% are looking at reductions.
One concern firms have is that they may not get those workers back if they let them go. Nearly six in 10 contractors report they are still having a hard time filling openings for skilled craft positions, such as plumbers and electricians, despite the state’s still elevated unemployment rate.
Sandherr said the industry needs to get more proactive about winning over displaced restaurant and hospitality workers to its side, where the pay and opportunities for advancement are better. The construction industry will also lobby the incoming Biden administration to push through more funding for infrastructure projects.
“Our objective is to make sure contractors end the year on a far better footing than where they started it,” he said on the call.
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