Transportation & Infrastructure From a market segment perspective, the infrastructure and transporta- tion markets may be one of the most dynamic of the bunch during this crisis. On one hand, we can expect to see project cancellations in some localities as municipalities deal with revenue shortfalls in their budgets due to the reduction of revenue-generating taxes and tolling. Also, the focus of these localities will be heavily affected as priority shifts to dealing with agency personnel and layoffs, as well as address- ing and supporting the citizens who are unemployed in the area. On the other hand, some states and municipalities are “taking advantage” of the reduction in traffic on the roads and in the transit systems to accelerate design and construction to save dollars on existing projects or to fast-start opportunities. Additionally, there have been calls by the AEC industry and many in the federal government to look at provid- ing further stimulus to the economy through an infrastructure bill or a “New Deal”-like program focused on large-scale or transformational projects that potentially could put tens of thousands back to work. The AEC industry would benefit enormously from such a focus. One of the most challenging aspects is the impact COVID-19 is having on passenger air, rail, and ship travel. All these modes of travel are done in a relatively confined space and therefore cause significant concern that traveler habits will be dramatically curtailed for the foreseeable future. We can assume that without a vaccine, the levels of travel previ- ously seen before the pandemic will take a substantial amount of time to return to pre-pandemic levels. Therefore, investment in these types of infrastructure and the design and construction associated with them may drop-off precipitously. Nonetheless, owners of these facilities and infrastructure will need to reinvent the way travelers engage with the respective modes of trans- port in order to provide people with confidence that travel is safe again. In this vein, we are likely to see acceleration of redesign of open spaces and incorporation of innovative materials into these settings that are easily cleaned or provide some level of protection against germs and contagions. Plus, the introduction of touchless entry/exit or check-in systems and the usage of technologies associated with screening for passengers affected by the virus are likely to rise. Not to mention modi- fication to the planes, railcars, buses, ships, etc. themselves in order to provide some level of social distancing and protect passengers from the transmission of germs and viruses. As such, the AEC industry is likely to see opportunities around the re- invention of travel and the associated physical renovation/modification at airports, embarkations/ports, rail/transit stations, tolling booths, and the like that will be necessary to facilitate travel in a COVID-19 envi- ronment. Given the dynamism in this market and the looming specter of further stimulus by the federal government, it is important that AEC firms in this market focus on workforce nimbleness and the introduc- tion of innovation and technological solutions. These actions will help firms take advantage of the acceleration in work as well as help the market return to some level of normalcy for commercial travel.
Manufacturing & Supply Chain The pandemic has clearly exposed weaknesses in our country’s ability to pivot and ramp-up manufacturing for personal protective and health- care equipment/supplies, as well as shortfalls in consumer goods and food supply production and distribution capabilities. In addition, the AEC industry should be prepared for supply chain interruptions. Many vendors, both domestic and international, may face ongoing worker and material shortages plus significant financial hardship and liquid- ity issues. As such, the industry may experience short- and long-term materials and equipment shortages. Smaller suppliers and companies exposed to high levels of debt prior to the pandemic are particularly vulnerable and we are likely to see several firms unfortunately fail. Because of these gaps and impacts on the manufacturing industry and supply chain, we are likely to see additional pressure from the fed- eral government on domestic companies to “on-shore” production of necessary goods, including critical construction materials and supplies. Moreover, we may see a shift in owners’ and construction companies’ buying habits over the long term as they look to domestically-produced equipment, supplies and materials to shore-up or protect their supply chain. The effect is that we may see these trends drive the demand for additional domestic manufacturing and warehousing facilities as well as the logistical/transport support that comes with them. We will also need to manufacture and distribute a COVID-19 treatment or vaccine at some point, thus creating demand for large-scale pharmaceutical production and distribution hubs. All of this points to the need for AEC firms to begin looking at how they can support the potential shift in this market.
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july 2020
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