How Will the Coronavirus Impact the Construction Industry?

Let’s face it, in the span of a few short weeks our lives have changed dramatically. The Coronavirus has begun its spread through the U.S. and is affecting almost every aspect of our lives. To slow and halt its progress, our government has resorted to aggressive measures to not only stop its spread but also mitigate the inevitable damage the virus may cause.

The fallout from all of this remains to be seen. However, one thing is for sure, it will have an inevitable impact on the construction industry. Some companies may be still operating business as usual, while others are feeling the strain. Some construction business owners are beginning to struggle with the immediate effects caused by canceled events, disrupted work schedules, and employee-related issues regarding health, income, and family life.

While the construction industry often deals with complicated risks, now there are additional concerns of delays to current projects and delays in planning and starting new ones. Currently, significant measures have been put in place to stall, if not eradicate the spread of this virus. While there is no specific timetable for how things will unfold, there are specific things to be noted.

Currently, most areas of the country have been called to decrease their public interaction and promote social distancing; even many of the popular Florida beach destinations are closing because of the virus. While working from home may be possible in other industries, it is generally not an option for the construction industry. In affected areas of the country, this can be a real concern.

China was at ground zero of this outbreak and experienced a slowing if not complete halt to their manufacturing industry. In the U.S., it is estimated that construction projects rely on 30% of their materials from China, and some are as high as 80%. Particularly to a commercial builder, this could mean higher material costs and slower project completions.

None of us like uncertainty, and even more so when there is money involved. With the potential damage this virus could cause, clients and investors may be hesitant to continue with current projects or begin new ones.

While no one could have predicted this event, contracts are still in place for current projects. Parties may be realistically looking at substantial delays and cost overruns. Many construction contracts will need to be reviewed for delays, scheduling, substantial completion, and liquidated damages. It is important to know what it is in your contract, including any force majeure provisions that could allow the cancellation of a contract in particular instances.

The Coronavirus has dramatically changed our lives in a few short weeks. How long this “new normal” will last is uncertain. Because of the volatility of the economy, market experts are saying that they are unable to make a forecast for the remainder of 2020. Typically, non-resident construction lags in relation to the overall economy, so some of the fallout from this event may not be fully realized for 12 to 18 months.

Experts contend that panic is never a good idea, it is wise to adopt a “wait and see” approach. Every day that passes will bring us more insight and information to guide us forward. It is important for business owners to stay focused on planning for long-term objectives, rather than the immediate future.

We are all, in some manner, impacted by this event. Communicating the issues you are experiencing on projects can go a long way. It is a given that at this point, we all are aware of the severity and risks we are encountering. Honest communication can go a long way to resolving potential issues before they erupt into a full-blown problem.

We understand that the effects of this virus are creating some unique legal issues for you and your business. We are here to guide you and help you and your business navigate these challenging times. If you have a question or concern, please contact us. We are here to help. Our office is fully operational and our lawyers and staff have full remote work capability if needed.

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