The Christmas holidays are behind us, and we rang in the New Year, leaving 2020 behind.
Good riddance.
Our family, and many around us, stayed reasonably healthy in 2020, although the pandemic is far from over. A few among our family and friends suffered COVID cases that were mild to moderate, but no one was hospitalized, and no one around us died from this remarkable scourge.
Yet starting with me, and echoed by so many others, I have complained loudly about how this impacted our lives: no vacation travel, practically no restaurant dining (something that is a big pastime of mine), and most importantly, little-to-no interaction with my many friends, some of whom I have been close to for almost my entire life.
Poor Me. As I look back on 2020, and the holiday season in particular, it finally became apparent that we are all very lucky people to have survived the pandemic so far, our little sacrifices notwithstanding. I thought about the heartbreak suffered by millions of Americans who had lost loved ones to COVID this past year, and how difficult that first holiday season must have been – and I finally came to my senses and gave thanks for my and my family’s good fortune. I’ll trade out the restaurant dining, vacations and watching football with friends in return for my good health any day, and am grateful for it.
For those who have followed my writings all these years, it is generally well known that I am an optimist by nature. And 2021 holds great promise for our society in general, and our industry in particular.
The vaccine has been released, and by late spring or this summer, everyone who wants to receive the shot will have been inoculated, and the infections rates are projected to start falling rapidly in the last half of the year. Operation Warp Speed, which is the U.S. military’s logistical execution for the vaccine delivery, is an amazing initiative that some have likened to D-Day and the Allied march across Europe, which successfully defeated Nazi Germany; the same determination and might is being unleashed on the distribution of the vaccine.
This Year. Watch as the economy continues to recover. Unemployment rates will fall throughout the year, accelerating in the last half, and the pent-up demand of the consumer will break loose. And while Biden has announced an ambitious $2 billion infrastructure initiative, weaving his program through Congress is no sure thing. But interestingly, even with currently inadequate public funding at the federal or state levels, private infrastructure investment has become a hot commodity in the private equity world and is one of the fastest growing areas of private investment interest.
Private-equity firms broke records in 2020 for North America-focused private infrastructure fundraising, raking in $52.3 billion. That’s $1 billion more than they raised in all of 2019, the previous record, and puts total unspent cash earmarked for infrastructure investment in the region at $102.8 billion. While these numbers include non-construction infrastructure such as broadband and renewable energy, those investments still require basic construction materials in their buildout plans.
And the consensus projections for total spending, including public money, reflects a steady and growing construction economy. To be sure, while it could have been far worse, certain statistics point to a 7% drop in total construction spending in 2020 compared to the previous year, but that will be offset by a 1% gain in 2021, and then a startling 13% and 7% increase in 2022 and 2023, respectively.
So, the promise of 2021 is a period of recovery for our industry, and a ramping up of demand. COVID cases will start to decline, and hopefully will be mostly non-existent by year end. And employment numbers will surge; all of this will help heal the pain and heartbreak of COVID-19 and set our path to years of prosperity for the aggregates industry.
About the Author
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on Twitter – @allenvillere.