Commercial construction is in high demand across the country and contractors remain optimistic about the current and forward-looking health of the sector, according to the Q3 USG Corporation + U.S. Chamber of Commerce Commercial Construction Index (‘Index’), released today. Nearly all contractors surveyed this summer (95%) expect revenues to grow or remain stable over the next 12 months compared to the prior 12 months, nearly the same percentage as in the Q2 2017 survey. Most contractors (93%) also expect to see profit margins stay the same or increase in the next 12 months, reflecting healthy contractor sentiment.
Despite contractors’ expectations for growth, access to talent continues to pose challenges in the third quarter of 2017, with 60% of contractors having difficulty finding skilled workers, compared to 61% in Q2. Nearly all contractors (91%) said they are at least moderately concerned about the skill level of the workforce, with 66% of contractors in the South expressing concerns about the availability of skilled labor. The Index release comes on the heels of Hurricanes Harvey and Irma, which are expected to exacerbate existing concerns about labor shortages in the South.
“The Commercial Construction Index is unique in providing the contractor’s view of the state of the industry, which is a key driver of the U.S. economy,” said Jennifer Scanlon, President and Chief Executive Officer of USG Corporation. “This quarter’s findings reveal strong optimism about future prospects for the industry, and also highlight a real need to address ongoing concerns about skilled labor shortages and the impact it has on building in the U.S.”
The Index looks at the results of three leading indicators to gauge confidence in the commercial construction industry – backlog levels, new business opportunities and revenue forecasts – generating a composite index on a scale of 0 to 100 that serves as an indicator of health for the contractor segment on a quarterly basis. The Q3 2017 composite index score was 73, down slightly from the second quarter’s 76, but close to the first quarter’s 74, representing a consistent sentiment of health in the sector.
The Q3 results from the three key drivers were:
- Backlog: On average, contractors currently hold 9.5 months of backlog, close to their average ideal amount of 12 months, indicating a steady market and healthy amount of booked work. This represents 77% of their ideal backlog levels.
- New Business: More than half of contractors (54%) reported high confidence in new business over the next 12 months (compared to 59% in Q2).
- Revenues: The majority of contractors (67%) continue to expect revenues to grow or remain stable in the next year, although expectations for the rate of expected growth inched toward more modest levels (compared to 71% in Q2).
“The commercial construction industry employs millions of Americans and the contributions the sector makes to the U.S. economy are vital to our country’s growth,” said Thomas J. Donohue, President and CEO of the U.S. Chamber. “However, finding skilled workers remains a challenge for this industry, and it’s likely to remain a challenge in the areas affected by the recent hurricanes. Finding skilled construction workers will be essential to ensure the Gulf region is able to quickly and efficiently rebuild. Our nation must address our workforce challenges to enable the economy to grow.”
This quarter, contractors surveyed were also asked about workforce skills development after revealing insights last quarter about the increasing difficulty in finding skilled workers. Respondents identified safety, technical proficiency, and communication as the most valued skills on the jobsite. Of note, there is a wide gap (40%) in the number of contractors who note the importance of communication skills and those who think their workers have strong skills in that area.
Just over half (53%) of contractors surveyed in Q3 said they plan to hire new workers, a decrease from 66% in Q2. This is accompanied by a 10% increase over last quarter in the number of contractors that plan to keep the same number of workers, indicating an anticipated shift from hiring staff to maintaining staff levels in the upcoming fall and winter months. Looking forward, only 39% of those surveyed in the third quarter predicted the situation will worsen, down from nearly a half (47%) in Q2, indicating that although there are shifts in the hiring environment, contractors believe it to be stabilizing. This situation bears monitoring in the coming months as parts of the Southern United States begin rebuilding from Hurricanes Harvey and Irma.
Related Stories
| Jun 8, 2012
Thornton Tomasetti/Fore Solutions provides consulting for renovation at Tufts School of Dental Medicine
Project receives LEED Gold certification.
| Jun 8, 2012
Allsteel names Kris Yates to head architectural products group
Yates is responsible for the start up, launch and ongoing sales and marketing of Allsteel’s new Beyond movable walls.
| Jun 8, 2012
Chestnut Hill College dedicates Jack and Rosemary Murphy Gulati complex
Casaccio Yu Architects designed the 11,300-sf fitness and social complex.
| Jun 7, 2012
Waterline exhibition displays visions for re-thinking the Chicago River
The designs of Waterline showcase why the Chicago River should once again be considered the city’s most important asset and sets the stage for increased awareness, education and reinvention of the River.
| Jun 7, 2012
WDMA and FMA to affiliate and integrate operations
Over the coming months both organizations will begin the process of formalizing the details of the agreement for final approval by both organizations, with the formal change expected to take effect in January 2015.
| Jun 7, 2012
Craig joins Cannon Design as associate principal
Craig will work closely with the firm's Corporate/Commercial Interiors leadership to help facilitate initiatives that strengthen awareness around workplace innovation and offer counsel on strategic workplace decisions.
| Jun 7, 2012
Stantec publishes 2011 corporate Sustainability Report
Stantec's fifth annual Sustainability Report was prepared in accordance with the internationally recognized G3.1 Sustainability Reporting Guidelines, developed by the Global Reporting Initiative.
| Jun 6, 2012
KPF designs tower for Yongsan IBD
The master plan, created by Studio Daniel Libeskind, is a dynamic urban environment containing contributions from 19 different architects practicing in diverse locations around the globe.
| Jun 6, 2012
SOM urges Chicago tenants to partner with landlords to cut energy use
Tenants can exceed building energy challenge targets recently announced by Mayor Emanuel.
| Jun 6, 2012
KLMK Group awarded contract with Parkland Health & Hospital System in Texas
KLMK will also provide planning guidance in all aspects of the project related to facility activation.