How is the pandemic affecting construction lending? | Surety industry seeks new bond signature rules amid outbreak | Expert predicts construction recovery by mid-May
The rapidly-evolving nature of the coronavirus pandemic makes it difficult to track how many commercial construction lending deals have been halted, but it appears that projects underway are still securing financing, albeit under different conditions, said Charles Hewlett, director of strategic planning at RCLCO Real Estate Advisors.
The surety industry is urging governments at all levels to change surety rules to allow electronic signatures without notarization on bond documents. Social distancing and shelter-in-place rules have made traditional ink signatures and stamped notarizations on bond documents impossible in many areas.
A market intelligence expert predicts that construction business will return to normal by mid-May. He created a Fear and Recovery Curve model to forecast when the coronavirus pandemic will peak and begin to wane.
The US government has introduced a system to let financial institutions not registered with the Small Business Administration participate in the $350 billion Paycheck Protection Program. The move is expected to add hundreds of lenders to the program, created in response to the coronavirus pandemic.
Rep. Maxine Waters, D-Calif., has introduced a bill similar to the Terrorism Risk Insurance Act that would create a reinsurance program for pandemics by capping companies' insurance losses. However, analysts fear the legislation would adversely affect the stock market.
Consultant Fredric Plotnick says construction project managers should consider whether their work during the coronavirus pandemic will affect the critical path of a project. "Forging ahead with non-critical activity won’t help finish on time and may even contribute to layoffs or cost overruns without advancing the project," he writes.
Several Florida municipalities have instituted harsh measures for construction firms that fail to follow social distancing on the jobsite, writes attorney Leonard Klingen. He writes that "construction employees are required to make reasonable efforts to keep six feet apart, a distance almost anyone in the industry can accurately estimate without floor markings or a tape measure."
Road construction in Vermont faces delays due to the coronavirus, after an order by Gov. Phil Scott halted construction until at least April 15. "We will start a few days late, but we will have started a few days late to ensure the safety and health of our workers," said Richard Wobby, executive vice president of the Associated General Contractors of Vermont.
The coronavirus pandemic has triggered layoffs at more than a quarter of construction firms responding to an online survey by the Associated General Contractors of America. The finding, based on responses from last week, contrasts with the government's monthly employment report for March, which found that construction employment declined by 29,000 as of mid-March.
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