How natural disasters affect the construction industry
September 2020 | Construction
BY MARK ANDERSON AND JOHN DOHERTY
There was an average of 520 natural catastrophes per year between 1989 and 2018
In 2019 alone, there were 820 catastrophes — a nearly 58% increase from the average over the last three decades
61% of construction executives predicted weather will have an impact on their operation in 2020
It’s no secret that the construction industry is directly affected by weather events. In fact, to a certain extent, decisions related to project plans, material choices, building strategies, and labor and construction timelines are all shaped by weather and climate. While the construction industry has always been affected by weather, severe weather events and natural disasters have become more frequent and intense. This has led to significant economic losses and created a challenging environment that contractors must now navigate.
According to the Insurance Information Institute, there was an average of 520 natural catastrophes per year between 1989 and 2018. In 2019 alone, there were 820 — a nearly 58% increase from the average over the past three decades.1 Furthermore, in a recent survey, 61% of construction executives predicted weather will have an impact on their operations in 2020.2
This article examines the nature of extreme weather and natural disasters, and how these events affect multiple aspects of the construction industry.
Natural disasters and extreme weather, such as hurricanes, wildfires and floods, have a profound effect on the construction industry. As these events become increasingly costly and common, it’s critical that construction firms understand the different ways weather can disrupt their operations:
Labor impacts— Securing skilled labor is a continued challenge for contractors that is magnified following weather events. For example, after a flood, general contractors frequently need to bring on subcontractors to help with remediation efforts. However, if the flood impacted multiple businesses in the area, these professionals are likely to be in high demand and short supply. Extreme weather can make it difficult for a contractor’s own workers to get to the job site, leading to recovery delays.
Material scarcity— Following a natural disaster, there is often an increased need for certain materials. That’s because natural disasters not only devastate residential housing, but commercial property as well, and there is an increase in restoration activity in a condensed timeline. In these instances, many firms are bidding on the same materials, driving up costs.3
Demand surges— A demand surge refers to the increased cost to repair or replace damaged property following a large-scale disaster, when construction firms compete for a limited supply of labor and materials needed for repair projects.4 Local supplies of materials, labor and equipment are typically deployed first to rebuild after natural disasters. When the local supplies are outstripped by demand, prices rise. In situations where a demand surge occurs, the cost of construction can increase by more than 20%.5
Disruptions and delays— In total, weather-related delays cost the construction industry $4 billion annually, and that’s just in the United States.6 Specifically, inclement weather can create unsafe working conditions, damage equipment, delay material deliveries or block access to a job site — all of which can extend project timelines and increase construction costs. Unforeseen delays can also create contract issues that may balloon to bigger problems, including litigation. In short, costs related to construction delays can add up quickly. Even if a firm has a plan for inclement weather, the sheer volume and unpredictability of these events can overwhelm the most prepared companies.
When it comes to natural disasters and how they impact the construction industry, it’s important for firms to be proactive rather than reactive. Doing so can help businesses mitigate the effects of natural disasters on their operations.
For many businesses, it’s not a question of if extreme weather will cause damage and disruptions, but when. As such, it’s crucial that firms understand how to prepare for and respond to natural disasters and similar events:
While the above strategies can help organizations prepare for natural disasters and other extreme weather, the truth is that emergency planning is not a one-and-done affair. In fact, emergency action plans are living and breathing documents that should evolve based on weather trends and lessons learned from previous disasters. Construction firms need to be agile and adjust their emergency plan following a natural disaster using post-event insights. Businesses must be willing to assess their performance in disaster situations, thinking critically about aspects of their plan that could be improved to assure stronger, quicker responses in the future.