Coronavirus’ impact on the A/E industry, April 13, 2020

Morrissey Goodale is providing A/E leaders with news and perspective on the coronavirus and its impact on the industry.

COVID-19 UPDATE

Hibernation continues

If Los Angeles County is any indication, many areas of the country may be locked down well into May, if not longer. On Friday, the county extended “safer-at-home” and business-closure orders through May 15, 2020. According to public health officials, 8,430 individuals in the county have tested positive for the coronavirus. Dr. Christina Ghaly, the county’s director of health services, warned that if social distancing restrictions were lifted, more than 95% of the county would contract the virus by the beginning of August; if restrictions are maintained, the number drops to 30%.

The New York Times reported that US government projections show infections spiking and fatalities approaching 200,000 if stay-at-home orders are prematurely lifted. Dr. Chris Murray, the director of the Institute for Health Metrics and Evaluation (“IHME”) at the University of Washington and creator of the model the White House uses to gauge the peak of coronavirus cases, says if restrictions are lifted across the nation on May 1, by July, coronavirus statistics in the country would be nearly back to where they are now. He says “a very substantial risk” of a rebound exists if the country opens for business before most transmission is near zero in each state.

U.S. may have peaked

Nation-wide fatalities caused by the Coronavirus are either close to or at peak, but each state is on a different timeline. According to Murray’s IHME model, New York and New Jersey, the heaviest-hit states, may have already passed their peaks while other states like Florida and Texas, where infections began to take hold weeks later, could see a rise through the end of the month. California, which flattened its curve early, may not peak until May. Nevertheless, according to Dr. Deborah Birx, the White House coronavirus coordinator, US COVID-19 cases have yet to peak.

Positive developments

• Predicted fatalities caused by COVID-19 continue to drop. Between March 26 and April 8, projected US fatalities have dropped nearly 21,000.
• According to various news outlets, several state leaders report social distancing measures are having an effect on slowing the virus. For example, hospitalizations in Connecticut are dropping, the number of affected people in Ohio is lower than previously projected, and California recorded a nearly 2% drop in ICU patients.
• According to Dr. Anthony Fauci, the country’s leading infectious disease expert, antibody tests could be available in a week. Antibody tests could verify whether someone has already had the virus and thus possibly indicate protection from re-infection.

Morrissey Goodale’s Word on the Street

Real-time market and industry intelligence gathered by the Morrissey Goodale team during Covid-19

National industry news

1. General sentiment among leadership teams this week was more upbeat than the prior one with the initiation of PPP loans and indications that pandemic may be reaching peak levels
2. Many executives expect that there will be pent up demand once we are able to return to work full time
3. Industry executives are already starting to plan for a national infrastructure stimulus package
4. Landlords offering breaks on leases – deferring and reducing rent
5. Design firms aggressively pursuing PPP loans
6. It’s a mixed bag on firms receiving PPP loans – really depends on their individual banks and quality of financial and legal teams. Many teams were working over the weekend to submit applications
7. Multiple reports that firm utilization rates are WAY up with remote working model
8. Firms connecting with clients virtually is now standard operating procedure
9. Firms that previously didn’t allow remote working have now embraced the new model
10. Private equity buyers seeing this a tremendous buying opportunity
11. Private equity backed buyers are still looking to engage sellers, make offers, and close deals so that the combined business will be ready to take advantage of the recovery
12. Buyers are advancing as much remote due diligence as possible since on-site visits are near impossible
13. Virtual interviews and on-boarding of new talent at home offices are the new normal

National/federal markets

1. Ramp up in VA hospital work
2. In anticipation of federal stimulus funding – State DOTs and Municipal agencies are accelerating design projects to get them shovel ready
3. Workforce and affordable housing projects moving forward nationally (specific reports from San Francisco/Bay Area, Florida, Northeast)
4. AE firms with an industrial client base – deemed essential in multiple states – now have operational challenges meeting client demands
5. Design firms that have healthcare portfolios are seeing a surge in demand to repurpose convention centers, hotels etc. to hospitals
6. Design firms working in entertainment and hospitality are hearing pencils down on projects – with layoffs and staff on reduced time
7. Non-grocery retail clients putting projects on hold

Energy and power generation

1. Massive layoffs with more to come in the oil and gas sector
2. Wind farm projects continue to be strong

Northeast markets

1. Grocery chain clients examining designs to adapt the new Instacart shopping world
2. Slowdown in residential and commercial development
3. Universities and schools bidding design projects – figure it’s a good time to shop for design services
4. PennDOT putting a hold on transportation field work
5. Large public sector infrastructure design projects are still being bid and won in Ohio
6. In New York, all non-essential construction must safely shut down, except emergency construction
7. Solar projects moving forward

Southeast markets

1. Florida DOT continues to be strong
2. Florida Turnpike revenues down which may impact future work
3. Multiple reports of commercial and residential developments being put on hold in Florida
4. Florida education projects moving forward
5. Mixed reports on Georgia development projects – some moving forward while some put on hold

Texas

1. Public Infrastructure design work continues to be strong
2. Some hits to hospitality and entertainment
3. Border wall activity continues
4. Concerns about funding for development in some regional markets

West coast

1. Healthcare and data center design projects moving forward
2. Bay Area construction shut down except for workforce and affordable housing.  Design continues for these project types too
3. Firms providing essential services in the field are proactively recruiting furloughed or laid off employees from other firms
4. Most surveying “crews” now consist of a single person
5. Slowing commercial and private development in CA and NV

Mountain states

1. Municipal and in-process land development projects still moving forward.

This article originally appeared on Morrissey Goodale’s website. Morrissey Goodale is a CFE Media content partner.

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