The devastation from Hurricane Irma has touched the heart and soul of Florida’s communities – setting incredible challenges for the state’s construction industry both in immediate crisis management and longer-term recovery.
There are stories of heroism, community spirit, and adapting to situations that would be unfathomable if you weren’t actually living through them. There also will be opportunities, because much of the billions of dollars to rebuild the state’s homes, businesses, and infrastructure will flow to the architectural, engineering and construction businesses throughout the state.
It is early going, and the data is rough, but some indications are that the construction industry may see an unprecedented business boom through the next 18 months.
“We believe the damage estimate from Irma to be about $100 billion, among the costliest hurricanes of all time,” Accuweather president Joel Myers said in a statement. “This amounts to 0.5 of a percentage point of the GDP of $19 trillion.”
Taking another comparison into account – statewide building permit data – you can see the implication of the storm for Florida’s contractors and suppliers.
The US Census Bureau reports that there were $25.86 billion in permits issued statewide in 2016. If Accuweather’s Myers is correct, this means the few days from the storm created the equivalent of four years of work for the industry. (Of course not all of the damage costs relate specifically to the construction industry but undoubtedly a very large percentage of the overall recovery costs relate to building and infrastructure requirements.)
Combined with Hurricane Harvey’s damage in Texas, there likely will be materials shortages, pricing pressures and stresses on supply chains, as well as significant construction labor shortages, which will ripple out of the affected areas through the rest of the nation.
The two hurricanes caused between $150 and $200 billion in damage to Florida and Texas, comparable to Hurricane Katrina’s costs in New Orleans in 2015, Moody’s Analytics says in a preliminary estimate.
Moody’s chief economist Mark Zandi says rebuilding from the back-to back storms will boost the US economy in the fourth quarter and into 2018.
“While at this point it’s hard to know how much (damage there is) the storms seem likely to have caused $150 billion to $200 billion in total damage to homes and furnishings, vehicles, commercial real estate and public infrastructure,” Zandi says in his analysis. “This is comparable to the property loss resulting from Hurricane Katrina.”
A critical factor in determining the disasters’ effects on the economy is “how much insurance money and government aid flows to the impacted reasons, and how quickly these funds get there.”
“As with most natural disasters in recent years, we anticipate that the combination of insurance money and government aid will roughly cover the full cost of the property damage and the lost economic output.”
Relevant to the construction industry, Zandi said the impact on economic growth will depend on labor availability. “There were already mounting labor shortages in both Texas and Florida before the storms, and they will surely be much more acute in their wake,” he wrote.
“Enticing construction workers in other parts of the country to the storm-ravaged areas won’t be easy, even at higher wages. “Nonetheless, we anticipate most of the rebuilding, save to damaged public infrastructure, to be completed by the end of 2018,” he wrote.