In conclusion, the future of aerospace depends more than ever on its ability to innovate. That will require integrated development among government, primes, supply chains and startup stakeholders. Every stakeholder will play a significant role in balancing compliance and business model disruption to ensure a rebound.

The Construction/Infrastructure Market

By Ken Simonson, Chief Economist, Associated General Contractors of America

Most construction firms are glad to close the books on 2020. But there is plenty of uncertainty as to whether 2021 will present more opportunities or continuing hardship.

At first appearance, construction held up relatively well in 2020. The value of construction put in place, seasonally adjusted, was nearly identical in October and February, the Census Bureau reported on Dec. 1, 2020. But peel back the top layer from that onion and differences poke out. Residential construction spending – new single- and multifamily construction and improvements to owner-occupied homes – increased 7%, while private nonresidential spending slumped 6% and public spending on projects under way slipped 2%.

As public works that began long before the pandemic finish up, public spending is likely to decline much more in 2021. Private nonresidential construction also appears likely to shrink further, at least in the first half of the year.

All types of owners have experienced revenue losses that may leave them unable to afford, or qualify for, financing for construction – businesses that had planned to expand or modernize; investors and developers of income-producing property; universities and other nonprofits; and state and local governments. Some owners will have shut down permanently, while many more will find the demand for additional facilities has disappeared or, at best, become too uncertain to justify starting construction in 2021.

In the near term, only a few nonresidential niches look promising. These include renovations of many types of existing facilities to accommodate coronavirus-related requirements or where a new tenant or user type replaces one that closed. The demand for “last mile” or “last hour” distribution facilities close to residential customers will remain strong, as will demand for more data centers. More facilities will be needed for delivering medical care, screening and testing outside of hospitals and nursing homes. Selected manufacturers will want to add capacity to meet surging demand for certain products. And a jump in homebuilding, some of it in undeveloped areas, will trigger limited demand for related infrastructure, retail, consumer services and local public facilities.

Most infrastructure and public building construction will be constrained by the balanced-budget mandates for nearly all state and local government entities, declines in tax and user-charge revenues and unbudgeted expenses related to the pandemic. The outlook will brighten slightly for 2021 if the federal government enacts substantial funding explicitly for infrastructure or to backfill revenue losses incurred by state and local governments generally or specific highway, transit or airport agencies. However, the lengthy process of distributing funds to agencies; allowing time for design, bidding and contract award; and assembly of equipment, materials and workers by the winning bidder means that most of the spending would occur after 2021.