Utah’s construction industry has felt the initial sting of the coronavirus pandemic, which has fundamentally altered job sites. But the bigger challenge looms, as experts predict a lengthy downturn in demand for new buildings as the state’s economy sags.
Nearly a quarter of all Utah jobs are tied somehow to construction, real estate or retail — three sectors closely intertwined in any recovery from effects of the health emergency.
Home prices along the Wasatch Front have stayed relatively level so far, according to Dejan Eskic, research associate at the University of Utah’s Kem C. Gardner Policy Institute. But home sales dipped nearly 24%, Eskic said, and “this is a big deal, especially as April is usually the start of the home-buying season.”
Construction activity is down 45% compared to last year, Eskic said, and tens of thousands of job losses among Utah’s renters could well slow future demand for nearly 5,500 new apartments that were under construction when the crisis hit.
The Beehive State had the benefit of going into the outbreak with both its residential and commercial real estate markets thriving, according to David Layton, president and CEO of Sandy-based Layton Construction — though it’s unclear how long that cushion will last, even as the economy starts to reopen.
“We entered this with strength and that momentum has really tempered the impact so far,” Layton said Tuesday, as part of an online business conference sponsored by the University of Utah’s Eccles School of Business.
“But I foresee the next seven and a half months being very telling of where our industry ends up going into 2021 and 2022,” he said.
Construction, Layton and others noted, has been deemed an essential business in state and county health orders. That’s meant work has continued but it has required changes at building sites — including daily employee questionnaires, segregated chemical toilets and new hand-washing stations, the CEO said.
Layton Construction and other firms have also seen their access to supplies of key building materials interrupted in the crisis, he said, forcing some slowdowns.
In hopes of keeping its workers healthy, Layton said, the company has treated each of its 175 job sites across the U.S. as its own village. “And as a member of the village,” he said, “employees have responsibilities to follow the protocols, both at the job site and certainly away, because irresponsible behavior outside of work could put co-workers in jeopardy.”
Adequate social distancing isn’t always possible at a work site, Layton said, but his employees use protective gear and are interviewed when reporting to work on their risk for exposure the night or weekend before, Layton said.
“That’s been proven very beneficial in keeping the virus from entering our job sites,” he said. “They have embraced this because they know we're kind of all in this together.”
But as businesses from a variety of industries are now getting squeezed by effects of an abrupt decline of commercial activity, many are postponing work or modifying construction plans with “the absolute requirement to save money,” Layton said.
Retail outlets have seen some of the greatest damage from the health-related closures, in a trend that is likely to dampen demand for new construction of stores, shopping centers and strip malls. And a further shift to online shopping as more Utah residents work from home is likely to make some of those changes permanent.
“Some retailers were really in a difficult position before COVID-19,” said Linda Wardell, general manager at City Creek Center in downtown Salt Lake City. “And now they're in an even tougher position now.”
City Creek Center, which reopens Wednesday after closing March 20 due to the pandemic, will see a gradual return to full business over several weeks, Wardell said. Many of the upscale mall’s tenants are behind on rent, she said, and others continue to see supply chain disruptions and can’t get unique goods that define their brands.
“So we’re all going to need to be patient,” she said, while customers “may need to embrace new realities” on hygiene, face masks and other precautions while visiting the mall.
“It’s really too soon to say if our customer is going to come back into our environment to shop,” Wardell said. “So in some ways, this is an exciting but also a very nerve-wracking time for us.”
Social distancing is transforming the prospect of building new office spaces, too. With more office employees working from home and those going to work needing more space, it’s unclear just how those trends will change construction plans.
“We're going to see office users taking a very close look at densities and their workspace environments as we move forward with this new world,” said Brandon Fugal, chairman of Colliers International, a commercial real estate brokerage with offices in Salt Lake City.
Along with other real estate firms, Colliers International has produced detailed guidelines for returning to work for office tenants, investors and landlords — with a goal of instilling confidence to boost economic activity, Fugal said.
“It’s important that we get the machinery back in full swing here and in full operation,” the real estate executive said. “But with that comes great responsibility.”
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