Home sales have been setting records in North Texas and statewide, rebounding sharply from the pandemic shutdown in late spring, and many builders are reporting big backlogs.
Despite the green shoots, construction jobs fell in July for both Dallas-Fort Worth and Texas while rising slightly nationwide. The U.S. also has held up better than Texas in retaining construction jobs over the past year and since February, before the pandemic effects started taking hold.
From June to July, D-FW lost 2,100 jobs at specialty contractors and Texas lost 6,300 at construction firms, according to the U.S. Bureau of Labor Statistics. The explanation: Even while consumers are eagerly enlisting homebuilders for new projects and renovations, many commercial customers are pulling back on nonresidential construction.
Office projects, hotels and retail space are being paused or even canceled amid COVID-19 concerns, officials said. It’s one more example of how the coronavirus is creating both economic havoc and opportunities, sometimes within the same industry.
“The one trend I hear from everyone is their business depends completely on what market segment they’re in,” said Meloni Raney, CEO of Texo, a trade group of about 250 construction companies that does about $18 billion in projects annually. “The impact has been all over the board. One company will say it’s hiring 10 people while another says it’s letting 20 go.”
Health care construction ground to a halt when COVID-19 started spreading, but the segment is starting to come back, she said. Industrial development is booming, especially for data centers and warehouses. But new office construction has practically stopped.
“We don’t need another office right now,” Raney said, citing a surge in employees working from home.
About 35% of employees are working remotely, according to an August survey of 390 Texas executives by the Federal Reserve Bank of Dallas. That’s up from 8.3% before COVID-19. Perhaps most relevant to construction companies: Executives said they expect almost 21% of employees to keep working from home after the pandemic ends.
“This genie will not be going back into the bottle quietly when the world gets past COVID-19, and that is a good thing in many respects,” said one survey respondent, who had expressed misgivings about remote work in February.
In normal times, that would foreshadow some relocations to smaller space, except that post-COVID-19 work environments may require more room for social distancing. Add two more intangibles — the uncertainty of a vaccine and the presidential election — and companies have even “more reasons to freeze” a project, said Jason Weeks, regional vice president of Brasfield & Gorrie, a large private construction company with 95 employees in D-FW.
“There are emotional reactions and business decisions, and it’s weighing on people pretty heavily,” Weeks said. “There is absolutely a correction going on.”
Commercial office construction has almost no new deals, he said. Projects that are fully funded and underway are continuing, and some new developments, especially in health care, have a good shot of starting. Other nonresidential projects that haven’t lined up their debt and equity are on the bubble.
“A lot of them have been paused, pushed or canceled,” Weeks said.
National trends mirror the local scene. While the U.S. had a net gain of 20,000 construction jobs in July, it lost 9,300 positions in the nonresidential building sector. For several weeks, contractors had talked about the rising number of delays and cancellations, especially in office, lodging and retail projects, according to the Associated Builders and Contractors, a national trade group.
“Commercial real estate fundamentals are in tatters, with the pandemic set to leave behind many shuttered restaurants, empty storefronts and vacated office suites,” Anirban Basu, chief economist for the group, said in a statement in early August.
Large, diversified construction companies are able to shift employees to meet current demand. Weeks talked about moving construction workers from office projects to data centers, for example.
Even within a specific field, the outlook for a project can vary widely. Convention-style hotels with big ballrooms and meeting areas face major headwinds, given the diminished prospects for large public gatherings. But hotels planning to offer a resort-like experience, with space for families to spread out, are moving ahead on schedule, Weeks said.
One sign of the times is an increased interest in government work. Before COVID-19, four to five companies in D-FW would bid to build a project for a city, county, state or federal agency, Weeks said. Now he’s running into 15 competitors for those deals.
“If it’s government work, most people figure it’s going to happen, and it’s pretty steady,” Weeks said.
But Basu, the economist, said state and local government finances were in dire shape because of the pandemic’s economic effects. Despite a healthy backlog for contractors, he said, the trajectory of the nonresidential sector would depend heavily on whether Washington lawmakers put a priority on construction and infrastructure.
Weeks said a lot of people are worried about what’s over the horizon.
“Most large contractors will tell you that 2020 will be OK,” Weeks said. “But ’21 and ’22 have a lot of question marks.”
©2020 The Dallas Morning News
Visit The Dallas Morning News at www.dallasnews.com
Distributed by Tribune Content Agency, LLC.