91ÊÓƵ

By Nate Beck
91ÊÓƵ

The coronavirus outbreak is likely to exacerbate delays on projects already prone to blown deadlines, according to a Moody’s analysis released this week.

The, which tracks delivery of various project types nationally between 2002 and 2019, finds 82 percent of multifamily projects were completed at least a month behind schedule. On average, multifamily developments wrapped up four months late, with just 15 percent finishing ahead of schedule and 8 percent on time. Similarly, 73 percent of office projects and 79 percent of retail developments encountered delays.

And the coronavirus pandemic — like other business interruptions — is likely to make construction delays worse or cause owners to cancel projects altogether.

“While this varies across jurisdictions, residential projects tend to be subject to stricter regulations and building codes,” according to the report. “Furthermore, more complex projects tend to have longer construction cycles.”

Industrial projects, by contrast, were less likely to finish late. The report found 45 percent of those developments missed their deadline, while 40 percent finished on time. That’s likely because industrial projects are typically simpler — one or two floors — and have “little ornamentation and few windows,” according to the report.

The Moody’s report looks to the last major downturn to weigh the effects of this one. The report finds that apartment projects that began in 2007 saw higher-than-average delays as they ran into the Great Recession, spiking 21.7 percent in 2008 and 2009.

Some cities saw steeper delays in project delivery during the last recession. According to the report, Portland, Oregon; Cleveland, Ohio; and Fort Lauderdale, Florida each saw it take more than 80 months on average for an apartment project that began in 2008 to wrap up.

The Moody’s report, however, notes that the current downturn caused by the pandemic is different. For instance, the shape of the downturn depends on local shelter-in-place policies meant to prevent the spread of the virus. The global pandemic may interrupt global supply chains, too, and the threat that COVID-19 could resurface later this year could also continue to curtail economic activity.

The report notes that places that did not explicitly ban construction during the pandemic could see fewer project delays — that is, unless the pandemic upends supply chains.

Construction forecasts for 2020 

• Moody’s expects the apartment sector to deliver 246,000 multifamily units nationally this year. That’s down from its previous estimate of 300,000 — which would have been the highest figure in two decades;
• Unlike apartments, office projects haven’t registered such a spike in delays. The industry is expected to deliver 47.8 million square feet of space — a 6.3 percent decline from prior estimates of 50.8 million square feet;
• Projections for retail projects have fallen 15.7 percent since the pandemic, from 6.4 million square feet to 5.4 million square feet. Retailers, however, have been under pressure from online shopping in recent years and weren’t expected to deliver a significant number of construction projects in 2020; and
• Even as online shipping increases demand for new warehouse space, Moody’s expects the industrial construction sector to take a hit during the pandemic, too. The report reduced its new construction forecast from 120 million square feet to 89.3 million square feet in 2020.