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2021 Maryland Construction Industry Survey Report

The state of Maryland's construction industry in 2021 from the eyes of contractors.

The past year has shown us the grit of Maryland’s construction industry. When lockdown mandates restricted many businesses from normal operations, contractors kept working as essential employees from the earliest days of the pandemic.

The industry rose to the challenge of figuring out how to protect those in the field, even as contractors faced new speedbumps like supply chain delays and skyrocketing costs of materials. Construction in the state kept grinding forward despite the pandemic.

Now, it’s 2021, and the world is facing a brand new challenge — recovery. Vaccines are making their way throughout communities, and COVID-19 cases are falling throughout the country. This report covers the state of the industry from the eyes of Maryland construction contractors, engineers, architects and real estate professionals, and where they think the industry is headed this year.

The data featured in this report was collected in January and February 2021 via the 2021 Maryland Construction Industry Survey, a joint effort of Gross, Mendelsohn & Associates, Maryland Construction Network, Wright, Constable & Skeen, and CREWBaltimore. Survey participants work in Maryland’s construction and real estate industry as company owners and accounting, sales and operational staff.

2021 Maryland Construction Survey Industry Report 3D Cover - 2

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Outlook & Trends

It’s no surprise that optimism among construction contractors dropped in 2021 compared to previous years. On average, 12% of contractors between 2016 and 2020 reported being less optimistic about their company’s outlook as compared to the prior year. That number jumped to 35% in 2021, an all-time high in the six-year history of the survey.

This lowered optimism also carried over when taking a birds-eye view of the industry. 31% of contractors said they expected the industry’s outlook to be worse in 2021, a jump from 2020 when only 10% of contractors said the same.

The #1 concern for contractors in 2021 was the economy, followed by finding and retaining qualified employees and the cost of materials. This is the first time in the six years of this survey that finding and retaining qualified employees didn’t rank as the #1 concern for contractors. This hints at the dire reality facing the industry. If the economy doesn’t improve, backlogs will eventually start to lighten, stifling cash flow and the ability to pay salaries.

COVID-19 Pandemic

When asked how the pandemic has affected their business, half of Maryland construction contractors said “things are about the same,” with 30% of contractors reporting that they were struggling. In terms of day-to-day operations during the pandemic, the majority of contractors reported they’d been experiencing minor delays when completing jobs.

As for the effect of the pandemic on commercial real estate, the majority of contractors think the pandemic will result in a long-term reduction in square footage of larger offices and an increase in warehouse properties due to the rise in ecommerce.


 

"It’s not surprising that the industry was able to pivot quickly to adjust to the challenges of the pandemic. These companies are problem solvers by nature and that showed in their ability to adapt to the circumstances of 2020. It will be interesting to see if the forced adoption of certain technologies during 2020 will lead to an accelerated rate of new technology implementation going forward."

 

Jonathan Lovell, CPA
Gross Mendelsohn

Jonathan R. Lovell Manager Gross Mendelsohn

 


Biden-Harris Administration

When it comes to how businesses will fare under the Biden-Harris administration, 50% of contractors think the outcome of the 2020 presidential election will negatively affect their business. Those who said there would be a negative impact pointed to the potential for increased regulation and taxation as part of their reasoning.

Diversity and Inclusion

In the past year, businesses across the country have responded to calls for racial equality by revamping or creating diversity and inclusion (D&I) initiatives. 56% of contractors said their company already has a D&I initiative in place.

Of all survey participants, 18% said their company was a disadvantaged business enterprise such as a Women Business Enterprise (WBE) or Minority Business Enterprise (MBE).

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Accounting

When it comes to their finances, most contractors seem to be doing okay. 83% of survey respondents said cash flow at their business has been about the same as usual over the past few months.

The majority of contractors said they expect their revenue to stay the same or decrease in 2021 compared to their revenue in 2020. This is a huge change from just a year ago. Back in early 2020, before pandemic related shutdowns, 70% of contractors expected to see their revenue increase in the then coming year. Only 39% said the same in 2021.

When asked why they don’t expect to see a revenue increase in 2021 over 2020, contractors pointed to a lack of new jobs or contracts on the horizon, needing to work harder to maintain the status quo and continued uncertainty from developers and owners.

When it comes to pricing, 69% of contractors said they didn’t increase their prices in 2020. This is a huge jump from this time last year, when only 34% of contractors hadn’t raised their pricing the year prior. Despite this, a whopping 90% of contractors said their material costs had increased in 2020.

Paycheck Protection Program

The Paycheck Protection Program (PPP) is a Small Business Administration loan that helped businesses keep their workforce employed during the initial wave of the COVID-19 pandemic. Nearly 75% of construction contractors said that their business received PPP funding in 2020. Half of those contractors said that the emergency funds were the key to keeping their company afloat during the pandemic.


 

 

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Human Resources

Staffing has been a constant challenge for most construction companies throughout the years, but the tides have seemingly eased in this area in the past few months. Even with the pandemic and recession, 75% of contractors said that they had enough employees to efficiently complete jobs.

Overall, contractors expect their headcount to increase or stay the same in 2021, with only 10% reporting they expected to decrease their headcount. Only 30% of contractors said they’ve had to lay off or expect to lay off employees due to the pandemic.

With cash flow remaining about the same as usual for most contractors throughout the pandemic, the majority of contractors gave salary increases in 2020, with 57% expecting to give salary increases in the next 12 months.


 

"I was impressed that the majority of contractors gave salary increases in 2020 and expect to give increases in the next 12 months. That reinforces their commitment to keeping and attracting good employees."

 

Joan Renner
CREWBaltimore Member

Joan Renner

 

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Technology

An increase in remote work has led to a greater potential for network vulnerabilities. The majority of contractors said their computer system hadn’t been compromised in the past year, yet a handful reported being hacked, getting a virus, or seeing an employee’s email used to attack a client or their own company.

The good news is that 57% of contractors said a technology professional helped them set up their remote work environment, and they felt confident in its security. A whopping 91% of contractors said they used technology like Zoom or Microsoft Teams to communicate with their customers and coworkers.

Given the increased importance of technology both in the office and out in the field, it’s important for contractors to devote the resources to ensure their company’s cyber security can protect them from virtual threats.


 

"At the start of the pandemic, successful businesses quickly adjusted from “in-person” meetings and networking events to “virtual” meetings and networking opportunities. This involved pivoting and learning an entire new suite of technology tools. Maryland Construction Network has pivoted and has hosted 36 virtual events in nine months!"

 

Verna Regler
Maryland Construction Network

Verna

 

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Legal

When the pandemic first began, the shockwaves hit construction jobs immediately. Many contractors turned to their contracts to determine their flexibility in delaying or canceling jobs, especially in the earliest days of the pandemic. 31% of contractors said they consulted their legal counsel more than usual in 2020, with 30% reporting their contracting documents have been facing more scrutiny than normal.

16% of contractors invoked or attempted to invoke a force majeure clause since the start of the pandemic. The force majeure clause relieves parties of meeting contractual obligations when certain circumstances occur that make it impracticable, illegal or impossible to complete the work, like a global pandemic. This became especially important at the start of the pandemic when little information existed on the transmission of COVID-19 and the effects of the virus.


 

"As we look for opportunities to turn COVID stumbling blocks into improved business practices, I hope that the increased emphasis on contract review and analysis of key terms will be a lesson learned that sticks for those in the industry. Contractors tend to focus on what they do best – building – but the contract documents drive the whole process and warrant attention, even in the best of times."

 

Lisa Sparks, Esq.
Wright, Constable & Skeen

Lisa Sparks

 

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Conclusion

2021 is bound to bring a new set of challenges, but if 2020 has taught us anything, it’s that the construction industry has the grit to weather the worst of storms. While optimism has dropped in the industry compared to previous years, here’s the good news — the construction industry is still hard at work. While many industries are tottering on extinction, construction contractors are maintaining a steady cash flow, paying employees and completing new jobs.

As vaccines make their way through our communities and the world heads towards recovery, the construction industry seems poised to make a quick recovery. Until we get to the other side, contractors need to keep pushing forward by looking for new work and keeping their employees safe out in the field.

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