RECOVERY GAINING STEAM MOVING INTO 2021

PSMJ Resources, Inc.
Posted on: 04/26/21
Written by: PSMJ Resources, Inc.

The A/E/C industry continues to recover nicely as coronavirus vaccinations continue to roll out.

Employment rates almost match late 2019 levels, and in a few more months “it looks like, overall, we’re going to be back to pre-pandemic employment,” says Dave Burstein, P.E., AECPM, a principal and senior consultant with PSMJ.

Engineering firms are rallying faster than architectural firms. And profitability has become highly variable — about 40 percent of firms were more profitable in 2020 than in 2019, and an equal percentage were less profitable. The firms that performed better in 2020 than in 2019 shared two common factors: They were in markets that continued to thrive, and they had solid project management processes that allowed for a relatively smooth work-from-home transition for employees.

PRIVATE BEST
Private sector markets continue to perform best, public sector markets continue to perform toward the bottom, and mixed markets, which are the majority, are in between.

The A/E/C markets are a mixed bag. Some, like water/ wastewater and healthcare, are very strong. Others, like commercial developers and education, are very weak.

Meanwhile, demand for housing, a great leading indicator for future A/E/C revenues, is stronger than ever.

“We all want more space, and that’s behind the surge,” says Taylor Marr, lead economist at Redfin, a real estate brokerage headquartered in Seattle, WA. Instead of spending money on vacations, people are remodeling their existing homes or buying a new homes. With record low shortages of inventory, builders have seen an opening. In fact, more than one in five homes are new construction.

BUILDING USA
Aside from a preference for single-family homes, people are wanting to spend less on mortgage payments and are migrating from expensive coastal cities to where prices are cheaper and land is more plentiful, says Marr. As a result, builders are creating new subdivisions with remote workers in mind, incorporating co-working spaces, coffee shops, and other amenities. These new subdivisions will eventually create demand for designing new roads, bridges, water systems, libraries, schools, etc., so this trend bodes very well for the A/E/C industry.

While the A/E/C industry will see some money from the $1.9 trillion COVID-19 relief bill, it’s important for those inside the industry to educate legislators on why that money should be spent on design and construction projects, according to Jimmy Christianson, vice president for government relations at Associated General Contractors, a trade association in Arlington, VA.

“Our members sent close to a quarter-million messages to Capitol Hill in 2020, and it really made a difference in moving the needle on various things” such as PPP loans and infrastructure investment, Christianson says. “Your voice really matters.”

Other actions that matter for getting the most out of 2021?

Here are 6 tips from Burstein:
1. Revisit your strategic plan if you haven’t done so since 2019. “Things have changed a lot in ways that I don’t think anybody could have predicted,” he says.

2. Keep up with PSMJ’s quarterly market forecasts, which include regional and national data. (You can get this information at no cost by either participating in these surveys or being a member of PSMJ. Here is the link to participate: https://www.psmj.com/ surveys/quarterly-market-forecast-2)

3. Look at your profitability in 2020; if it slipped, upgrade your PM processes and training.

4. If your turnover rate is not in the single digits, review your recruiting practices. And be sure to advertise continuously—not just when you need someone.

5. Protect your best employees by looking at making them an attractive ownership investment offer.

6. If you’re thinking of buying, selling, or acquiring, visit PSMJ’s A/E/C mergers and acquisions exchange at AECmatch.com

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