Getting Ready to Face 2021

By Greg Sitek

The January editorial has traditionally been a capsule forecast. Last years was no exception. It was titled: “Forecast For 2020 Is Definitely Not 20/20” and definitely proved to be not 20/20. I believe that this is my 45thJanuary editorial and probably the most difficult of all. In retrospect, I remember writing the piece for January 2000 and referencing the anticipated effects of Y2K.

Based on what has been going on, not only here in the USA but globally, it’s safe to say that the dreaded impact of Y2K’s arrived 20 years after the fact. 

If looking at what to expect for 2020 was challenging looking at what to expect for 2021 is even more challenging.

By the time you are reading this some of the barricades preventing a 2021 forecast should have been resolved. No matter what happens the construction industries will be busy.

According to the American Society of Civil Engineers   (ASCE):

“The ongoing COVID-19 pandemic has impacted all aspects of our daily lives – including our infrastructure.

State and Local governments are having to reprioritize their spending due to drastically reduced revenues, as well as costs associated with combating the current public health crisis. In fact, the National Governors Association has requested $500 billion in fiscal support for states to support budgetary shortfalls that have resulted from the pandemic. As Americans continue to abide by stay-at-home orders, states and localities are seeing a reduction in gas tax receipts, while water utilities are seeing lost revenue as they continue to waive fees for households unable to complete payment, combined with decreased commercial usage.

At a time when interest rates are low and traffic is light – ideal scenarios for fast-tracking construction – capital projects and critical maintenance work is being put on hold due to dramatic budget shortfalls.

To combat these projected revenue losses, ASCE joined AASHTO and other stakeholders in calling for Congress to provide support in the form of $37 billion in emergency relief for state Departments of Transportation. Currently, state DOTs are estimated to lose an average of 30% of transportation revenues over the next 18 months. Some states like Washington have experienced a 45% drop in traffic, along with 75% decreases in ferry and transit ridership. Georgia has also seen a nearly 50% decrease in traffic, with vehicle miles traveled in Atlanta down 70%, impacting transportation funding. Furthermore, Pennsylvania is expecting to see a loss of $800-$900 million in the next months due to lack of licensing and registration fees and lower gas/diesel tax.

Meanwhile, the American Public Transportation Association has requested another $32 billion to cover operational costs for the nation’s hard-hit transit agencies, in addition to the $25 billion that transit systems already received in the CARES Act.

ASCE is also urging Congress to support water utilities through relief that covers costs associated with moratoriums on water service disconnections, or reconnections of delinquent accounts, as well as grant or low interest loan funding to help support utility operations at a time when revenues are dropping dramatically. A component of this relief includes achieving parity between private and public sector employers regarding eligibility for payroll tax credits to alleviate the costs of paid leave during the coronavirus pandemic as introduced in the Supporting State and Local Leaders Act.

Providing these forms of near-term relief to state and local governments will help ensure our infrastructure remains safe, reliable, and ready for us to resume our pre-pandemic routines. 

Meanwhile, the rental industry prepares for recovery.

ARA revenue forecast calls for modest growth in 2021 accelerating in 2022 and beyond. The American Rental Association (ARA) is forecasting a 13 percent decline in equipment and event rental revenue this year compared to 2019, dropping to $48.7 billion in the United States. 

However, the latest forecast released by the association on Nov. 12 calls for modest overall growth in 2021, ticking up 0.3 percent to $48.9 billion, before accelerating recovery kicks in with growth of 9.2 percent in 2022, 6.8 percent in 2023 and 4.8 percent in 2024 to reach $59.7 billion.

Construction and industrial rental revenue also is forecast to finish 2020 with a significant hit in revenue, dropping 13.3 percent to $33.8 billion and a 3.3 percent decline is forecast for 2021 before double-digit growth of 11.2 percent comes in 2022.

The general tool segment weathered the coronavirus (COVID-19) pandemic the best and is expected to finish 2020 down 5.2 percent to $12.7 billion and is expected to top its 2019 revenue peak by 2022.

“The forecast shows us how hard the coronavirus pandemic hit the equipment and event rental industry. Hopefully 2021 will see us getting back some of the revenue losses we experienced in the equipment and general tool segments. However, the event segment continues to have a steep hill to climb and we will be working hard to bring more relief to that segment through government stimulus programs,” says John McClelland, ARA vice president for government affairs and chief economist.

Investment in equipment is significantly down in 2020, with a 43 percent decrease to $8.166 billion. Equipment spending is forecast to rebound by 17.4 percent in 2021 and by 46.3 percent in 2022 to surpass annual investment of $14 billion.

As we know, ARA represents a vital component in the construction industries and its importance will continue to increase. 

This material appears in the January 2021 issues of the ACP Magazines:

California Builder & EngineerConstructionConstruction DigestConstruction NewsConstructioneer,Dixie ContractorMichigan Contractor & BuilderMidwest ContractorNew England ConstructionPacific Builder & EngineerRocky Mountain ConstructionTexas ContractorWestern Builder