Commercial Construction Struggles Reach Las Vegas

Many industries have languished in recent months due to the hardships of COVID-19, and the construction sector is no exception. Analyses have shown the impacts are ongoing, including a recent survey from the Associated General Contractors of America (AGC) that found 78% of respondents reporting project delays and disruptions in October. A new wave of struggles is reportedly washing over the sector this month, the latest hit occurring in Las Vegas.

On Nov. 4, Construction Dive reported significant losses in Sin City's commercial construction, specifically entertainment and hospitality—two sectors the industry relies upon in the region. The Rider Levett Bucknall crane count index is one unit of measurement economists are using to review commercial construction progress in the U.S., including Las Vegas, where the number of construction cranes plummeted to four in the third quarter of 2020 from 17 in the first quarter. Other cities experiencing a drastic decline in crane use this year are Chicago, New York and San Francisco.

Nevada Contractors Association CEO Sean Stewart likened crane count drops to the completion of several multibillion-dollar projects, such as Resorts World and Circa Resort and Casino, which cost $4.3 billion and $1 billion, respectively, Construction Dive states. Both casino hotels opened at the end of October in addition to the completed expansion of the Las Vegas Convention Center.

However, according to Chris Ring, of NACM's Secured Transaction Services, large commercial construction projects face numerous challenges because of COVID-19, with projects' progress in question for several reasons. Projects could be halted altogether because of shelter-in-place orders, Ring said, or projects could be delayed because social distancing is causing trades to not work in tandem. An example of the latter is if an insulation contractor and electrical and plumbing contractors work different shifts. Projects could also be delayed because contractors are having trouble finding labor because some laborers choose not to work because of the fear of contracting the virus.

"Pay-when-paid clauses are critical because of the delays," Ring said. "Also, if the purchase order incorporated other documents by reference (general contract and/or subcontract) and those contracts have liquidated damage clauses because of project delays, the material supplier may be on the hook for those damages."

Ring said not all hope is lost for the construction industry though as residential new home sales and remodels are up—arguably because interest rates are low—as well as DIY sales. Home construction doesn't appear to be as deeply impacted because large crews are not required, he noted.

As for Las Vegas, AGC Chief Economist Ken Simonson told Construction Dive that the city often finds a way to bounce back, citing the city's ability to overcome the economic struggles between 2006 and 2011.

"I tend to write off Las Vegas too readily. It seems to find ways of reinventing itself," Simonson said in the article. "This might be a riskier assumption because so much of their income depends on conventions, and it's not clear if convention business will resume even after COVID-19 is held in check."