Proposal activity for architecture, engineering and construction (A/E/C) firms increased significantly in the 1st Quarter of 2023, according to PSMJ’s Quarterly Market Forecast (QMF) survey. The predictive measure of the industry’s health rebounded to a net plus/minus index (NPMI) of 32.8 in the first three months of the year. This followed the 8.0 NPMI in the 4th Quarter of 2022, which marked the lowest level since the final quarter of 2020 and the second-lowest NPMI recorded in the last 10 years.
PSMJ President Greg Hart noted that the 1st quarter results are a pleasant surprise, especially since data was collected after the Silicon Valley Bank collapse and amid continuing interest rate hikes and recession predictions. “I don’t think anybody expected this kind of recovery,” he said. “But inflation is cooling and there are some positive signs in the housing market, so maybe we’ve found the bottom.”
First quarter results have historically been the strongest throughout the history of the QMF survey, which may play some part in the jump in project opportunities. In the last 10 years, the first quarter NPMI averaged 45.2, with the results weakening in subsequent quarters. The average NPMI for the 2nd quarter since 2013 is 36.5, with the third and fourth quarters averaging 29.0 and 25.7, respectively. Year-over-year, the NPMI for the first three months of 2023 was down substantially from a near-record NPMI of 60.2 reported in the first quarter of 2022.
PSMJ’s proprietary NPMI is the difference between the percentage of respondents who say that proposal opportunities are growing and those reporting a decrease. In addition to overall activity, the QMF surveys A/E/C firm leaders about their proposal activity experience in 12 major markets and 58 submarkets.
Private Sector Construction Markets Struggle, Publics Thrive
Firms working in private-sector markets continue to report historically low levels of proposal activity, while those in the public sector perform better, as the chart below indicates. Environmental topped all 12 major markets with an NPMI of 71.4, followed by Water/Wastewater at 70.8. Transportation continues to thrive, aided by the Infrastructure Investment and Jobs Act (IIJA), with an NPMI of 65.5. Energy/Utilities remains solid, repeating its fourth-place finish from the prior quarter and a near-exact NPMI of 55.1 (down from 55.2).
Since the 1st quarter of 2019, the Energy/Utilities market has been out of the top five only once (the 2nd quarter of 2021), and the Water/Wastewater market has missed the top five just twice.
The biggest surprise of the 1st Quarter may be that Education was the fifth-strongest among the major markets with an NPMI of 42.2. This is the first time that Education hit the top five since the 2nd quarter of 2018. The Higher Education (NPMI of 45.3) and K-12 (42.3) submarkets drove the resurgence.
Related Stories
Market Data | Nov 30, 2021
Two-thirds of metro areas add construction jobs from October 2020 to October 2021
The pandemic and supply chain woes may limit gains.
Market Data | Nov 22, 2021
Only 16 states and D.C. added construction jobs since the pandemic began
Texas, Wyoming have worst job losses since February 2020, while Utah, South Dakota add the most.
Market Data | Nov 10, 2021
Construction input prices see largest monthly increase since June
Construction input prices are 21.1% higher than in October 2020.
Market Data | Nov 9, 2021
Continued increases in construction materials prices starting to drive up price of construction projects
Supply chain and labor woes continue.
Market Data | Nov 5, 2021
Construction firms add 44,000 jobs in October
Gain occurs even as firms struggle with supply chain challenges.
Market Data | Nov 3, 2021
One-fifth of metro areas lost construction jobs between September 2020 and 2021
Beaumont-Port Arthur, Texas and Sacramento--Roseville--Arden-Arcade Calif. top lists of gainers.
Market Data | Nov 2, 2021
Construction spending slumps in September
A drop in residential work projects adds to ongoing downturn in private and public nonresidential.
Hotel Facilities | Oct 28, 2021
Marriott leads with the largest U.S. hotel construction pipeline at Q3 2021 close
In the third quarter alone, Marriott opened 60 new hotels/7,882 rooms accounting for 30% of all new hotel rooms that opened in the U.S.
Hotel Facilities | Oct 28, 2021
At the end of Q3 2021, Dallas tops the U.S. hotel construction pipeline
The top 25 U.S. markets account for 33% of all pipeline projects and 37% of all rooms in the U.S. hotel construction pipeline.
Market Data | Oct 27, 2021
Only 14 states and D.C. added construction jobs since the pandemic began
Supply problems, lack of infrastructure bill undermine recovery.