More About COVID-19 and Construction

Now that that Coronavirus (COVID-19) has become a political football, it’s worth noting two things: 1) it’s clearly going to have an economic impact, maybe a significant one; 2) we know very little about it.

The second point makes the first point more uncertain.

That point was driven home to me yesterday at the quarterly meeting of the Federal Reserve Bank’s Business Advisory Committee in Pittsburgh. The Fed representatives were very interested in what impact COVID-19 was having on businesses thus far. Representatives from US Steel, Calgon Carbon, and CBRE shared information that shed some light. Again, the most important information shared was that there is little information to share. Because the virus was first detected in China, the reliability of the information is suspect to a degree. Some other places that have begun to experience outbreaks, like Iran, have proven to be less reliable still. Here are some of the things that came out of the discussion:

  • The virus is most dangerous to the elderly and person with compromised systems.
  • Of the 80,000 cases identified, 18,000 have already recovered to full health.
  • Disruptions to the supply chain from China and Asia have already occurred
  • US corporations have begun to implement travel bans. This will accelerate as cases of COVID-19 multiply in the U.S.
  • US corporations have begun to make contingency plans for employees to work from home or stay home.

The latter point is the most relevant for the construction industry in Pittsburgh. Even if nobody from Western PA becomes infected with COVID-19, many construction projects will experience delays in decision-making by owners that simply have higher priorities than capital project approvals. What we’ve learned from the small sample size of the supply chain thus far is that building products will be impacted, especially since U.S. manufacturers trimmed inventories at the end of 2019. Equipment and building products have as many as 20% of the subcomponent supply chain made in China. Japanese and other Asian manufacturers are about 40% reliant upon China for components. Construction projects will be impacted, including those in Pittsburgh.

What is really unknown at this point is the penetration of the virus into the U.S. Americans mostly avoided the SARS virus a decade ago but COVID-19 seems more difficult to contain. A pandemic that last a few months, even if it proves to be less deadly, is going to drain economic activity, which will slow the construction market.

Panic about COVID-19 seems unjustified. Concern about the effect on the economy does not. Read more in the first portion of JLL’s Economic Insights

In construction news, Allegheny County Airport Authority awarded the first major bid packages for the airport’s Terminal Modernization Program. Independence Excavating was awarded a $20.9 million contract for the early access site general construction. Mosites Construction was awarded a $20.7 million contract for upgrades to the PA Turnpike Allegheny Tunnel. Rycon Construction was awarded the $4.9 million AGH Genomic Lab. Rycon will also be building the $38 million, 220-unit 23rd & Railroad Apartments for SteelStreet Capital. PSU approved a contract with Turner Construction for the $112 million Liberal Arts Building at University Park. Jendoco Construction was awarded the $5.7 million Forker Lab Building at PSU-Shenango. University of Pittsburgh selected Turner for the $5 million Brain Institute Lab fitout at BST3. A.M. Higley was awarded a contract for the $9 million Convention Center Green Roof Phase 2. Uhl Construction was awarded the $5 million expansion/renovation to Lithia Motors South Hills Subaru. AHN selected Volpatt Construction for the $3.5 million Allegheny Valley Hospital 2D renovation. Swartz Builders is building a 140,000 square foot fabrication shop for Hranec Sheet Metal in German Township, Fayette County.

Pitt took proposals from Mascaro, Massaro, PJ Dick, Rycon & Volpatt on $3 million Langley Hall renovation. PJ Dick, Massaro & Turner were among the CMs proposing on PWC’s 70,000 square foot tenant improvements at One Oxford Center.

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