Coronavirus Bulletin for the A/E Industry

Coronavirus Bulletin for the A/E Industry

The latest on the Coronavirus and its impact on the A/E Industry.

For the duration of the Coronavirus pandemic, Morrissey Goodale will provide A/E leaders with news and perspective on the coronavirus and its impact on our industry.

BIG PICTURE— UNCHARTERED WATERS

Still to be determined.  The more quickly we see a downward trend in the number of new Coronavirus cases, the more quickly the economy will stabilize and rebound.  The level of government and public reaction to the outbreak will be the primary factors in how long infection levels continue to climb.  A recession is the likely result, but since underlying economic fundamentals were strong going into the pandemic, there is a chance for a reasonably rapid rebound.  Both banks and states are in far better shape than they were just prior to the great recession.  The Federal Reserve reduced interest rates to zero percent yesterday and announced it would purchase $700 billion in bonds and securities in an effort to stabilize financial markets and support the economy.  At the time of this bulletin, however, US stocks have dropped 6% with bond yields falling, as well.  Should the virus prove more deadly than currently believed and trigger increased panic, we can expect a prolonged recession and slower recovery.

IMPACT ON AEC MARKETS— RIPPLE EFFECT COMING

Regardless of the level of the actual health risk, the perception of the outbreak is evident and will have an impact on all markets.

Hotel/Travel:  Travel-based businesses were already facing an uphill struggle in 2020.  With major events of all kinds being shut down and corporate traveling falling off, the hotel industry will be hit hard.  Tourist destinations will suffer as local economies that rely on tourism will dry up quickly.  Delta airlines announced it will cut passenger capacity by 40% to absorb the drop in travel demand.  It is the largest cut in the airlines history, even surpassing the reductions made after 9/11.  Click here for more information>

Retail:  Some retailers, like Apple, Nike, and Urban Outfitters, are closing all stores until the end of the month, then will reevaluate.  Moves like this recognize not only safety for their staff and customers, but also the cautious spending that consumers will no doubt exhibit until the worst has clearly passed. (opens in a new tab)”>Click here for more information>

Manufacturing:  Global supply chains and operations around the world are being affected, with companies sourcing primarily from China at the highest risk. (opens in a new tab)”>Click here for more information>

Office:  Overall unemployment could tick up by about 1.5% in 2020 and clients could put the brakes on new projects while financing may become tight for new initiatives until the all-clear is given. 

Infrastructure:  According to a number of engineering firms we spoke with in the last 24 hours, infrastructure projects are still ongoing.  As agencies adjust their own staff to virus policies, work will proceed.  But no one is making any promises.

Healthcare and Higher ed:  Typically stalwarts in a down economy, these markets will continue to provide opportunity for the A/E industry, but according to several firm leaders we spoke with in the last 24 hours, with schools and colleges shutting down and some hospitals shutting down construction inside facilities, a slowdown is likely, at least in the short-term.  It is also possible that remote learning will accelerate after this crisis and brick-and-mortar investments may come increasingly into question.

WHAT TO FOCUS ON THIS WEEK— NEAR-TERM BLOCKING AND TACKLING

Communicate with staff.  Let them know you are monitoring and will make decisions that are in the best interest of the company and its people.  Leverage technology to its fullest to keep operations running and the staff informed.

Check in with clients.  Likely many of your more formal messages to clients have already been sent in the form of reassuring emails, etc.  This week, pick up the phone and find out what your clients are concerned about and what they need, and do what you can to help.

Watch your cash.  Make sure you invoice and collect this week.  If any parts of your business are likely to soften, if they have not already, take action now to reduce payroll either by reductions in salaries and/or unpaid leave.  Have a phased reduction plan in place, including the elimination of any non-critical, short-term expenses.  Connect with your bank and increase your line of credit, if necessary.  Check with your corporate attorney, accountant, and insurance agent to see what if any changes you should be making to your business and what, if any local, state, or national programs or regulation changes you can use to your firm’s advantage.

Match services to the need, if possible.  For example, NV5 announced today the delivery of facility health and safety consulting services designed to mitigate the risk of COVID-19 exposure for clients’ employees and stakeholders. (opens in a new tab)”>Click here for more information>

Take care of yourself.  You can’t do much for your company if you don’t take care of yourself.  Make sure you have adequate supplies at home.  Diet, exercise, and proper rest will keep you at your best when your company needs you most. 

About the Author

Morrissey Goodale
Morrissey Goodale is a management consulting and research firm specializing in the architecture, engineering, and environmental consulting industries; offering executive search, mergers & acquisitions, financial advisory, leadership training, and strategic planning services.

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