Commercial construction is in high demand across the country and contractors are confident in the trajectory of the industry, according to the USG + U.S. Chamber of Commerce Commercial Construction Index (‘Index’), that launched recently. Nearly all contractors surveyed – 96 percent – expect revenues to grow or remain stable this year compared to 2016, with 40 percent expecting an increase and only 3 percent expecting a decrease in revenue.
The Index is a new quarterly economic indicator designed to gauge what drives the commercial construction industry and its leaders, including specific issues like backlog of work, new business pipeline, revenue projections, workforce issues, and access to financing. Given the sector’s importance to the U.S. economy and the outsized role it could play in years to come, the data contained in the Index will be vital to better understanding trends, challenges and opportunities. 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.
“This first-of-its-kind Index was born out of a need to understand the issues that affect commercial construction. The Index will deliver critical insights into the future health of the industry,” said Jennifer Scanlon, president and chief executive officer of USG Corporation. “USG is committed to providing solutions for our customers in order to help the entire industry make strong contributions to the U.S. economy. Through the Index we are able to identify areas of strength and pinpoint areas of improvement where industry leaders must focus.”
Two-thirds (66 percent) of contractors said they expect to employ more workers in the next six months, indicating growth in a sector that employs approximately 3 million Americans. But 61 percent of Index respondents reported difficultly finding skilled workers. The contractors reported the biggest shortages in the concrete, interior finishes/millwork, masonry, electrical and plumbing trades.
“The commercial construction industry is a vital engine for the American economy,” said Tom Donohue, president and CEO of the U.S. Chamber. “The projected growth uncovered in this research is good news for employers and workers, but there is reason for concern in the lack of qualified talent available in vital specialties. To get our economy growing to its full potential, we must ensure that we have a workforce that is ready to fill the available jobs. Each quarter, this first-of-its-kind research will make us smarter about future challenges and inform solutions for our country’s leaders.”
The report looks at the results of three leading indicators – backlog levels, new business opportunities and revenue forecasts – to generate a composite index on a scale of 0-100 that serves as an indicator of health for the contractor segment on a quarterly basis. The Q2 2017 composite index score was 76, representing continued health in the sector. This composite score is up two points from a 74 in the Q1 survey, driven primarily by a bump in the ratio between actual and ideal backlog. New business and revenue results also saw slight increases quarter-over-quarter.
The composite scores from the three drivers of confidence were:
Backlog: 81, up four points in Q2 over Q1
Contractors’ current average backlog levels represent 81 percent of their ideal backlog levels, up from 77 percent in Q1. On average, contractors currently hold 9.9 months of backlog, while the ideal amount is 12 months.
New Business: 77, up two points in Q2
Nearly all contractors continue to report high or moderate confidence in the market. Well over half of contractors (59 percent) reported high confidence in new business over the next 12 months (up from 51 percent in Q1), indicating a shift to higher levels of confidence among some respondents.
Revenues: 71, up two points in Q2
An overwhelming 96 percent of contractors expect revenues to grow or remain stable in 2017 over 2016. Of those expecting revenue increases, the actual percentage of expected increases varies widely. Forty percent expect revenue increases of 7 percent or more in the next 12 months.
The Index findings are compiled using survey results from contractors within a DD&A panel of more than 2,700 decision makers from across key facets of the commercial construction industry. This first public report was developed using research from previous quarters, which puts into context the state of contractor sentiment in the U.S. building industry.
Related Stories
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.
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.
Healthcare Facilities | Aug 9, 2016
Key strategies to reduce healthcare facility costs and maintain operations
The right approach during the planning, design, and construction of a new facility can yield a positive return on investment and lower the overall cost basis for ongoing operations, writes Steve Higgs, Senior Managing Director with CBRE Healthcare.
Laboratories | Aug 8, 2016
The lab of the future: smaller, flexible, tech-enabled, business focused
A new CBRE report emphasizes the importance of collaboration and standardization in lab design.
Industry Research | Aug 5, 2016
47 states experienced improvement in year-over-year construction unemployment rates in June
The drop in the construction unemployment rate from June 2015 extends the uninterrupted monthly sequence of year-over-year rate decreases that started in October 2010, according to Bernard M. Markstein, PhD, President and Chief Economist of Markstein Advisors.
Industry Research | Aug 2, 2016
Nonresidential construction spending declines again in June
On a year-over-year basis, nonresidential construction spending has fallen 1.1 percent, marking the first annual decline since July 2013
Industry Research | Jul 26, 2016
AIA consensus forecast sees construction spending on rise through next year
But several factors could make the industry downshift.
Industry Research | Jun 15, 2016
Survey: Americans avoid touching handles but use their phones in public bathrooms
Bradley’s 2016 Healthy Hand Washing Survey offers insights into restroom use.
Industry Research | May 11, 2016
Why corporate bathrooms stink and how good design can fix this
Despite their importance, bathrooms are often overlooked when it comes to building design. Gensler's Johnathan Sandler spoke with people in the industry and detailed some of the biggest gripes.
