May 5, 2020 – Martin Marietta Materials, in its first-quarter report, said that of the company’s three primary end uses, the outlook for infrastructure construction, particularly for aggregates-intensive highways and streets, is expected to be the most near-term resilient. While the majority of the United States has currently been ordered to shelter in place, most state Departments of Transportation (DOTs) are currently operational and continue to advance transportation projects, capitalizing on the reduction of vehicles on the road and related traffic congestion. Florida, for example, recently announced plans to accelerate $2.1 billion of critical transportation projects. That said, state DOTs are experiencing lower revenue collections and states may have other short-term funding needs relating to the COVID-19 impact that may decrease the scale and/or postpone the timing of future construction. Industry representatives are actively engaging with Congress to address surface transportation infrastructure in the “Phase 4” emergency relief and economic recovery COVID-19 legislation, including an immediate $49.95 billion in flexible federal funding to offset an estimated 30% loss in state transportation revenues in the next 18 months and the passage of a comprehensive major surface transportation reauthorization package.
Nonresidential construction activity on existing projects has continued in most regions. However, according to an April 2020 survey published by the Associated General Contractors of America, an overwhelming number of respondents indicated that commercial projects in the design or planning stages are being delayed or canceled. Unlike commercial activity, industrial construction is not expected to experience significant near-term disruption from COVID-19. Warehouses, distribution centers and data centers are expected to perform relatively well in the current environment as businesses increase e-commerce activity, secure regional supply chains and become more reliant on cloud and network services. Similarly, large energy-sector projects along the Gulf Coast of Texas that are actively underway are expected to continue.
Residential construction activity is expected to decline in 2020, as homebuilders and homebuyers delay plans in the wake of unprecedented economic uncertainty. Supported by third-party forecasts, management believes the residential decline will be widespread but not as persistent as the period of low activity seen during the Great Recession as Freddie Mac estimates that 2.5 million housing units are needed to address the current nationwide housing shortage. This situation is particularly evident in states with significant undersupply, including Texas, Colorado, North Carolina and Florida. On a national level, housing starts remain below the 50-year annual average of 1.5 million despite notable population gains.