How COVID–19 Will Impact the Building Products Market
As they shake off the immediate impacts of the global pandemic and subsequent recession, successful building product manufacturers will be focusing on a few key trends that will see them through to the recovery…and beyond.
By Paul Giovannoni
Take it from legendary boxer Mike Tyson, “Everyone has a plan ‘til they get punched in the mouth.” These very descriptive words very much apply to the way COVID-19 impacted and continues to impact the construction industry and all of the stakeholders and influencers within it.
By late 2019, industry pundits were projecting a recession sometime in 2020. After all, we were all riding the nation’s longest positive economic streak in history, so how much longer could it really last anyway? The construction industry—like many others—felt as if it was in a never-ending, ninth-inning loop. That loop closed in mid-March, but a new one is already beginning to emerge.
Building product manufacturers didn’t escape the pandemic’s wrath and, in many cases, were hit harder than other stakeholders in the industry. Many wrapped up banner years in 2019—with revenue at all-time highs, sentiment indicators favorable and construction backlogs overflowing—and quickly pivoted from worrying about where their next new hire was going to come from to hoping that their cash reserves and strategy would endure the pandemic.
The many challenges that COVID-19 and the resulting recession present to manufacturers have been compounded by the industry’s supply chain structure and the lack of direct connection to end customers (contractors) or influencers. In a time when information and insights into market conditions are the most critical, manufacturers for the most part are still at an arm’s length from the market.
The Path to Recovery Will Be Rocky
Even as the country continues to battle the economic and social impacts of COVID-19 and the resulting recession, the construction industry has started to raise its head and look to the future. Many point to the current activity in the residential market as proof and believe the sector will lead the economy out of the recession (or, at minimum, be our industry’s bright star). And while current activity supports this assumption, the underlying fundamentals of the residential market, and, to a greater extent, the nonresidential market, indicate that 2021 will likely have its share of challenges as well.
We expect 2021 to bring an overall decline in construction put-in-place spending compared to 2020 levels. This will impact both the residential and nonresidential markets. We break down the reasoning for each in this report.