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TRANSCRIPT
Imagining a Reimagined Future
The Post COVID-19 Recover Outlook
May 19, 2020
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“He knows changes aren’t permanent, but change is.” – Neil Peart
COVID-19 Industry Implications and Outlook | May 19, 2020 update
3FMI Corporation | Copyright 2020
Just because the future is uncertain, it doesn’t mean it is unknowable.
COVID-19 Industry Implications and Outlook | May 19, 2020 update
National Bureau
of Economic Research:
• Wholesale/retail sales
• Industrial production
• Real income
• Employment
Dynamic models
are required in the
current context
4FMI Corporation | Copyright 2020
An unprecedented velocity of change
Pre-pandemic Post-pandemic
+273,000 jobs (2/2020) → -33M jobs (3/15- 4/18/2020)
3.5% unemployment rate (2/2020) → 25% unemployment rate
7-yr peak labor force participation rate (2/2020)
+2.9% wage and salary growth (Q4 2019)
+4% retail trade and food sales (2/2020 vs. 2/2019) → -30% retail trade and food sales (3/2020 and 4/2020)
Q1 Q2 Q3 Q4
Dod
ge
NA
HB
Go
ldm
an S
ach
s
JP
Mo
rga
n
-18%/ -34%
-2%/ -9%
+8%/ +19%
+3%/ +10%
US GDP projections
March 31, 2020- May 15, 2020
COVID-19 Industry Implications and Outlook | May 19, 2020 update
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Preparing for a V, U, or L shaped recovery
$1,307
$788
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Total construction spending put in place (US)
Billions of current dollars
Source: FMI
$1,404
(2-year decline/ 2% CAGR 20- 24)
$1,286
(3-year decline/ 0% CAGR 20- 24)
$834
(4-year decline/ -9% CAGR 20- 24)
Near return to Great Recession trough
COVID-19 Industry Implications and Outlook | May 19, 2020 update
6FMI Corporation | Copyright 2020
$200
$250
$300
$350
$400
$450
$500
$550
$600
2019 2020 2021 2022 2023 2024
2019 ($521B)
Mid case
Best case
Worst case
Residential suffers from credit constraints and loss of wealth
Current “interim” Q2 2020 Outlook trajectory
COVID-19 Industry Implications and Outlook | May 19, 2020 update
Residential buildings spending put in place (US)
Billions of current dollars
Source: FMI
7FMI Corporation | Copyright 2020
$250
$300
$350
$400
$450
$500
$550
$600
2019 2020 2021 2022 2023 2024
2019 ($534B)
Mid case
Best case
Worst case
Nonresidential buildings construction will be very uneven
Current “interim” Q2 2020 Outlook trajectory
COVID-19 Industry Implications and Outlook | May 19, 2020 update
Nonresidential buildings construction spending put in place (US)
Billions of current dollars
Source: FMI
8FMI Corporation | Copyright 2020
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Category 1 Category 2
Po
ten
tia
l d
ep
th o
f d
eclin
e
Potential length of decline
Sh
allo
wD
eep
Brief Prolonged
Office
Lodging
Commercial
Nonresidential buildings construction segment recession risk
Potential depth and length of decline
Source: FMI
Nonresidential Sector
(Overall)
COVID-19 Industry Implications and Outlook | May 19, 2020 update
Segment impact
Health care
Religious
Educational
Public Safety
Communication
Transportation
Manufacturing
Amusement & Recreation
Lodging
• Travel (both business and leisure), RevPar and
occupancy rates all plummet through 2020 as a
result of COVID-19
Office
• Downtown markets experience rent stabilization
while vacancy rates trend higher
• Slowed employment growth expected to weigh
on future spending
• Demand for data center investment continues to
expand rapidly alongside 5G deployment
Health care
• Demand and adoption for health care services
and technologies (e.g., telehealth and wearables)
are expected to jump substantially in the wake of
COVID-19 and 5G deployment
• Affordable Care Act is anticipated to become an
important political platform through the 2020
presidential election
• Project pipeline suggests some resurgence in
larger health care campuses
Manufacturing
• COVID-19 related (international and domestic)
supply chain disruptions, political uncertainty,
ongoing trade tensions and oil price collapse
support continued decline in industrial production
into 2021
• Large scale planned petrochemical investments
along the Gulf Coast postponed or shelved until
oil prices rebound and volatility in the energy
sector stabilizes
9FMI Corporation | Copyright 2020
COVID-19 Industry Implications and Outlook | May 19, 2020 update
Pacific
Division
-1%
Mountain Division
-1%
West North
Central Division
-2%
East North
Central Division
-2%
West South
Central Division
1%
East South
Central Division
-1%South Atlantic Division
0%
Middle Atlantic
Division
-1%
New
England
Division
-1%
Forecast growth in nonresidential buildings construction spending put in place
2020; by Census Division
Source: FMI March 20, 2020
10FMI Corporation | Copyright 2020
$230
$240
$250
$260
$270
$280
$290
2019 2020 2021 2022 2023 2024
2019 ($251B)
Mid case
Best case
Worst case
Public infrastructure may not provide traditional relief
Current “interim” Q2 2020 trajectory
COVID-19 Industry Implications and Outlook | May 19, 2020 update
Nonbuilding structures construction spending put in place (US)
Billions of current dollars
Source: FMI
11FMI Corporation | Copyright 2020
2006- 2011 Percent Change in Construction Spending Put in Place
US total
Source: FMI
Total construction
Multifamily
Lodging
Office
Commercial
Health Care
Educational
Religious
Public Safety
Amusement and Recreation
Transportation
Communication
Manufacturing Power
Highway and Street
Sewage and Waste Disposal
Water Supply
Conservation and Development
Single family
Improvements
-80% -60% -40% -20% 0% 20% 40% 60% 80%
COVID-19 Industry Implications and Outlook | May 19, 2020 update
Bulls and bears coexist in all economies
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Potential winners and losers
COVID-19 Industry Implications and Outlook | May 19, 2020 update
Manufacturing
Distribution
Communications/
Data Centers
Intelligent Transportation Systems
Lodging
Commercial
Amusement & Recreation
Office
13FMI Corporation | Copyright 2020
Avoiding poor—if not dangerous—decision making
Decision Paralysis Gut Instinct
• Most common among loss-
averse organizations
• Abandonment of analytical
rigor
• Premature action/
“Ready. Fire. Aim.”
• Potential for anchoring and
confirmation bias
• Most common among risk-
averse organizations
• Data/ Information obsession
• Delayed action/
“Wait and see”
• Potential for normalcy bias
COVID-19 Industry Implications and Outlook | May 19, 2020 update
14FMI Corporation | Copyright 2020
Regardless of the shape, the recovery will be reinvented
The biggest mistake
made during the Great
Recession…
Not moving fast enough
COVID-19 Industry Implications and Outlook | May 19, 2020 update
Avoid decision paralysis
Perform frequent situation analysis
Consider market composition
Align with customers
Know what to say no to
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