An Analysis by Hsiao-shan Yang, PhD
Construction in the three major sectors now faces even more uncertainty after a moderate slowdown in late 2019. To get a better sense of the construction outlook for the current situation, economists can look at the comparative construction delay statistics of the Great Recession in 2008. During the 2008 recession, projects in the US experienced around 6 more months of delay on average in the apartment and retail sectors, while the office sector saw 3-4 more months of a construction delay. Having these precedented delays in mind, expect an even more deeply negative impact on construction in the current situation, given that the US has 30 statewide shelter-in-place orders as of March 30th and a few states have deemed some construction workers non-essential.
Indexed Inventory Growth
Source: Moody’s Analytics REIS
How bad will things be with all the uncertainty coalesced by the pandemic-triggered recession? One of the worst economic scenario forecasts from Moody’s Analytics is the Protracted Slump scenario, with second quarter GDP expected to contract by more than 30% (annualized), and the economy continuing to slide until late 2021. How will this be translated into construction completions? Our experience with the Great Recession in 2008 at least suggests a prolonged construction delay will occur.
Hsiao-shan Yang, PhD is an Economist/Data Scientist in the research and economics department at REIS. She is primarily responsible for credit risk modeling, collateral performance monitoring and forecasting, and data visualization and analytic techniques. Dr. Yang received her PhD in Economics and a Master in Mathematics from the University at Buffalo, and a bachelor’s degree in Economics from the National Taiwan University.