2020 – The Year That Was and What Lies Ahead for the Construction Industry?

By Deepa Bhat, CPA, CFE, ACA, Principal
ASL Construction Group

I was once again at my annual Board retreat (virtual, alas!) for the Builders’ Exchange of Santa Clara, and came away with some fascinating data – both historical and predictive.  Like many of us, I was curious to understand the impact of COVID-19 on this industry in 2020.  These were the top takeaways from this meeting:

  • Annual rate of construction spending in the U.S. in 2020 at $344.8B and $1,093.7B for public and private projects, respectively represented a modest 2% increase over 2019, with private projects logging a 10% increase from 2019 (source: November Annual Construction Report for the U.S. Census Bureau).  Which surprisingly, was not quite so far from the predictions made last year – the forecast for 2020 was 2% with residential construction pushing ahead at 3% over 2019 while commercial drops 2% below 2019.  See 2019 predictions in my January 2020 article: What Lies Ahead for the Construction Industry?
  • And depending on whom you believe, the forecast for 2021 is flat, with residential construction pushing ahead at 3% over 2020, while commercial drops 3% below 2020 levels (source: Alex Carrick, Winter 2020-21 Forecasts, p. 2).
  • Contradicting the above, is the prediction that overall construction will increase 4% in 2021, after dropping 14% in 2020, with residential up as much as 5% and non-residential up 3% over 2020 levels.  Retail and hotel industries are predicted to languish (source: construction.com, December 2020).
  • To give us some perspective on this 14% decline in 2020, 2009 (post-financial crisis of 2008) recorded a 24% decline.  So, a silver lining, I guess?
  • The expected increase in residential construction is assumed to be directly attributable to low interest rates.
  • The U.S. construction market has been experiencing an upswing cycle for the last 38 quarters, since 2011, which is over 9.5 years (Source: Alisa Zevin , ENR Magazine December 2020).
  • Construction backlog was 7.8 months in 2020 in the Western United States compared to 6.4 months in 2019.  Surprisingly, the backlog for all other regions (Mid States, Northeast and South) was lower in 2020 than when compared to 2019.  (Source: ABC Press Release, P. 2, 12/17/2020).  In my opinion, this is likely due to the stricter quarantine and shelter-in-place protocols in the Western United States as compared to the rest of the country.
  • Moving from national trends to the Bay Area, private housing units authorized by building permits in San Jose, Sunnyvale, and Santa Clara dropped 23% from 2019 (source: Census Bureau Statistics, through November 2020).  Retail, office market, industrial, and warehouse markets in Santa Clara County, all posted increased vacancy rates in Q2 and Q3 2020 over 2019 (source: Kidder Mathews, 2020 3Q Market Breakdown), as expected under the shelter-in-place, stay-at-home, and work from home protocols in place during 2020, especially in Santa Clara County.
  • The median sale price of a single family home in Santa Clara County in November 2020 was $1,383,000 up from $1,259,000 from 2019 (source: California Association of Realtors, November 2020 Sales and Price Activity) even as 29,800 homes lay vacant across the County (source: US Census Bureau, American Community Survey, Santa Clara County).  Again, this increase could be the result of lower interest rates in 2020.

I’ll leave you with a few final pieces of information:

  • The Anderson Forecast states that technology sectors, residential construction, and logistics will lead the recovery in CA.
  • Construct Connect believes the market is diverging along residential vs. non-residential, with the former more buoyant.

If you would like a detailed copy of the presentation, please contact me at, dbhat@aslcpa.com, and I’d be happy to share it with you.