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 | Oct 24, 2016
New construction starts in 2017 to increase 5% to $713 billion
Dodge Outlook Report predicts moderate growth for most project types – single family housing, commercial and institutional building, and public works, while multifamily housing levels off and electric utilities/gas plants decline.
High-rise Construction | Oct 21, 2016
The world’s 100 tallest buildings: Which architects have designed the most?
Two firms stand well above the others when it comes to the number of tall buildings they have designed.
Market Data | Oct 19, 2016
Architecture Billings Index slips consecutive months for first time since 2012
“This recent backslide should act as a warning signal,” said AIA Chief Economist, Kermit Baker.
Market Data | Oct 11, 2016
Building design revenue topped $28 billion in 2015
Growing profitability at architecture firms has led to reinvestment and expansion
Market Data | Oct 4, 2016
Nonresidential spending slips in August
Public sector spending is declining faster than the private sector.
Industry Research | Oct 3, 2016
Structure Tone survey shows cost is still a major barrier to building green
Climate change, resilience and wellness are also growing concerns.
Industry Research | Sep 27, 2016
Sterling Risk Sentiment Index indicates risk exposure perception remains stable in construction industry
Nearly half (45%) of those polled say election year uncertainty has a negative effect on risk perception in the construction market.
Market Data | Sep 22, 2016
Architecture Billings Index slips, overall outlook remains positive
Business conditions are slumping in the Northeast.
Market Data | Sep 20, 2016
Backlog skyrockets for largest firms during second quarter, but falls to 8.5 months overall
While a handful of commercial construction segments continue to be associated with expanding volumes, for the most part, the average contractor is no longer getting busier, says ABC Chief Economist Anirban Basu.
Designers | Sep 13, 2016
5 trends propelling a new era of food halls
Food halls have not only become an economical solution for restauranteurs and chefs experiencing skyrocketing retail prices and rents in large cities, but they also tap into our increased interest in gourmet locally sourced food, writes Gensler's Toshi Kasai.
