flexiblefullpage
billboard
interstitial1
catfish1
Currently Reading

Commercial Construction Index drops amid Coronavirus pandemic, but contractors poised for near-term recovery

Market Data

Commercial Construction Index drops amid Coronavirus pandemic, but contractors poised for near-term recovery

Contractors quickly prioritized worker health and safety, and 1 in 3 plan to hire more workers in the next 6 months.


By U.S. Chamber of Commerce | June 25, 2020

Courtesy Pixabay

The Q2 2020 USG Corporation + U.S. Chamber of Commerce Commercial Construction Index (Index) released today plunged from 74 in Q1 to 56 in Q2. Two of the index’s three main indicators—confidence in new business and revenue expectations—both fell 26 points, to 50 and 44, respectively, revealing the severe impact of the coronavirus pandemic on the construction industry. However, the third indicator, backlog, dropped only a modest three points, remaining consistent with the first half of 2018. Survey results were largely collected in the month of April, at the height of shutdown restrictions.

The overall drop in the Index stemmed in part from the fact that very few contractors (16%) now express high confidence in the market’s ability to provide new business opportunities in the next 12 months (down from 54% in Q1), and there was a 30 percentage point drop in contractors expecting their revenues to increase (17% in Q2 from 47% in Q1). Meanwhile, the percentage expecting to see their revenues decrease in the next 12 months spiked from 2% in Q1 to 21% in Q2.

Yet several survey findings suggest that the commercial construction industry is poised for recovery. Contractors still have significant backlog, with 60% of contractors reporting they have at least six months of backlog (compared to 69% in Q1). More than eight in 10 (83%) say their revenue will increase or remain about the same in the next year. And, three in four contractors say they have moderate or high confidence that the next year will bring sufficient new business opportunities (and in the next two years, that percentage rises to 93%).

This quarter’s Index also reveals that the commercial construction industry is an important employer and is ready to hire more workers. One in three contractors (32%) plan to hire more workers in the next six months, while nearly half (48%) believe their workforce will stay the same. Only 15% expect to employ fewer people.

“Even as most construction has been deemed essential during the last few months, the loss of new projects and revenue has been severe. This industry is key to our economy, representing three million American jobs and $700 billion in spending," says Christopher Griffin, president and CEO of USG Corporation. “We’re watching closely signs of improvement, as commercial construction can serve as a bellwether for other economic development and recovery.”

 

Covid-19 Impacts

When the survey was taken in April 2020 the vast majority (87%) of contractors reported they were currently experiencing delays due to the coronavirus outbreak, with 87% expecting delays to continue into the summer and 73% expecting delays will remain in the fall.

However, contractors become less concerned about delayed projects as they look to the future. In April, over a third (35%) of contractors reported that at least 75% of their projects were delayed. Asked to look three months ahead, only 16% of contractors expected the same, and looking six months ahead, only 8% expect at least 75% of their projects to be delayed. 

“No industry has been immune to the devastating impact of Covid-19,” said Neil Bradley, U.S. Chamber of Commerce executive vice president and chief policy officer.  “However, the commercial construction industry appears poised for a quick recovery and a return to growth. This is good news for the economy and the millions of Americans who work in the industry. Congress can help by continuing to support the economy.”

Contractors quickly adapted their operations to comply with new safety guidelines. More than nine in 10 contractors (92%) said they changed work procedures to increase social distancing. And, contractors indicated worker health and safety is top of mind. Given a list to choose from of the most severe Covid-19 consequences for their business, three-quarters (75%) said worker health and safety is a top concern, followed by fewer projects (48%), and increases in workforce shortages (33%).

Asked how the pandemic will change how they do business in the future, contractors said adjustments to safety and work procedures would be the top change. They also expect big changes in more remote work for their staff and paying greater attention to language used in contracts.

On June 24, join USG Corporation and the U.S. Chamber of Commerce for a virtual panel discussion on Covid-19’s impact on the construction industry, where USG Corporation CEO Chris Griffin, U.S. Chamber of Commerce Senior Economist Curtis Dubay, and Association of the Wall and Ceiling Industry CEO Michael Stark will discuss these survey findings and more. 

The Index is comprised of three leading indicators to gauge confidence in the commercial construction industry, generating a composite Index on the scale of 0 to 100 that serves as an indicator of health of the contractor segment on a quarterly basis. The survey was in the field April 4 - 27, 2020.

The Q2 2020 results from the three key drivers were: 

  • Backlog: The backlog indicator dropped three points to 73 (from 76 in Q1).
  • New Business Confidence: The overall level of contractor confidence dropped to 50 (down 26 points from Q1). 
  • Revenue: Contractors’ revenue expectations over the next 12 months dropped to 44 (down 26 points from Q1). 

The research was developed with Dodge Data & Analytics (DD&A), the leading provider of insights and data for the construction industry, by surveying commercial and institutional contractors.

Related Stories

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.

Building Team | Sep 6, 2016

Letting your resource take center stage: A guide to thoughtful site selection for interpretive centers

Thoughtful site selection is never about one factor, but rather a confluence of several components that ultimately present trade-offs for the owner.

Market Data | Sep 2, 2016

Nonresidential spending inches lower in July while June data is upwardly revised to eight-year record

Nonresidential construction spending has been suppressed over the last year or so with the primary factor being the lack of momentum in public spending.

Industry Research | Sep 1, 2016

CannonDesign releases infographic to better help universities obtain more R&D funding

CannonDesign releases infographic to better help universities obtain more R&D funding.

Industry Research | Aug 25, 2016

Building bonds: The role of 'trusted advisor' is earned not acquired

A trusted advisor acts as a guiding partner over the full course of a professional relationship.

Multifamily Housing | Aug 17, 2016

A new research platform launches for a data-deprived multifamily sector

The list of leading developers, owners, and property managers that are funding the NMHC Research Foundation speaks to the information gap it hopes to fill.  

Hotel Facilities | Aug 17, 2016

Hotel construction continues to flourish in major cities

But concerns about overbuilding persist.

Market Data | Aug 16, 2016

Leading economists predict construction industry growth through 2017

The Chief Economists for ABC, AIA, and NAHB all see the construction industry continuing to expand over the next year and a half.

boombox1
boombox2
native1

More In Category




halfpage1

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021