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US Infrastructure Expected to Fare Well in the Post-Pandemic Environment

DuckerFrontier, May 6, 2020

When compared to residential and nonresidential building construction, infrastructure is expected to emerge from the COVID-19 pandemic with minor disruptions. All segments of nonresidential building generally decline in recessionary conditions, but amid the COVID-19 pandemic, most states have allowed public works infrastructure projects to continue, deeming infrastructure an “essential” service. Despite local governments limiting some activity and workloads for staff on new permits or approvals, public works construction teams remain on-call to ensure no disruptions to water, communications, and other essential utilities, primarily for health facilities and city centers. The growth of telehealth, social programs, unemployment, and other assistance will also serve a logic for rapid upgrades following the pandemic.

Post-Pandemic Infrastructure Environment

Building category drivers of construction significantly shift in near term due capacity, distancing and utilization. Public construction investment is outpacing private investment following significant business disruptions, and likely will continue through 2021.

While we are still seeing activity in infrastructure, the segment’s long-term growth will falter until the federal stimulus kicks in. A long tail of activity will continue due to recent bonds passage and multi-year funded projects, but future local government balance sheets are likely to be strained from decreased tax revenues, reducing project spend. However, our Building & Construction expert and Managing Principal, Chris Fisher has identified four segments for growth within infrastructure to keep your business afloat amid persistent uncertainty.

Leading Segments for Growth

  • Infrastructure spending remains a popular component of future spending bills that will include additional stimulus tied to labor and activity versus budget bail outs at a local level Interest rates help more now to secure long-term debt and create the best environment to spend
  • The government was already planning to shell out trillions of dollars – the Trump administration and congress want a 2 for 1: big spending, give jobs, get infrastructure
  • There will likely be more Public Private Partnerships – to mobilize in certain areas, allow for private job growth, manage funding needs, and innovate. COVID-19 response is paving the way for private/public possibilities.
  • While roads will be a big focus, we see great attention and linkage to safety, response for water infrastructure and communications (rural access for 5G, data exchange, etc.)

The long-term growth of infrastructure will pause until Federal stimulus kicks in. Some tail of activity will continue due to recent bonds passage and multi-year funded projects. Future local government balance sheets likely to be strained – tax revenues down, reducing project spend and a lag period of impact. OPEX likely to outperform CAPEX.

– Chris Fisher, Managing Principal, Building & Construction

In the coming days, our Building and Construction experts will be doing a deep dive into a state level analysis of the infrastructure outlook. This will help companies to better what’s ahead for the infrastructure sector and how best to navigate.

DuckerFrontier’s Building & Construction team is at the forefront of key trends impacting the industry amid COVID-19 disruptions. Visit our COVID-19 Resource Hub for the latest insights and implications for global business, or contact us to connect with a team member.

 

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