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
Office Buildings | Mar 7, 2017
Large creative office projects generate staggering returns for property investors
A new Transwestern report examines the adaptive reuse trend across the U.S.
Industry Research | Mar 7, 2017
These are the 10 most expensive cities in the world to build in
Paris, Frankfurt, and Macau are all on the list, but none of them are more expensive than the city in the number one spot.
Office Buildings | Mar 2, 2017
White paper from Perkins Eastman and Three H examines how design can inform employee productivity and wellbeing
This paper is the first in a planned three-part series of studies on the evolution of diverse office environments and how the contemporary activity-based workplace (ABW) can be uniquely tailored to support a range of employee personalities, tasks and work modes.
Industry Research | Feb 15, 2017
Putting workers first should be every employer’s priority
The latest Sodexo report on workplace trends explores 10 factors that are impacting the global work environment.
Industry Research | Feb 13, 2017
How thought leadership marketing can generate referrals for your firm
The most effective way to boost your reputation is through thought leadership marketing.
Market Data | Feb 1, 2017
Nonresidential spending falters slightly to end 2016
Nonresidential spending decreased from $713.1 billion in November to $708.2 billion in December.
High-rise Construction | Jan 23, 2017
Growth spurt: A record-breaking 128 buildings of 200 meters or taller were completed in 2016
This marks the third consecutive record-breaking year for building completions over 200 meters.
Market Data | Jan 18, 2017
Fraud and risk incidents on the rise for construction, engineering, and infrastructure businesses
Seven of the 10 executives in the sector surveyed in the report said their company fell victim to fraud in the past year.
Market Data | Jan 18, 2017
Architecture Billings Index ends year on positive note
Architecture firms close 2016 with the strongest performance of the year.
Industry Research | Jan 12, 2017
Are public buildings considered infrastructure?
A survey, conducted in October by The Harris Poll on behalf of AIA, asked 2,108 U.S. adults if they considered public buildings part of their community’s infrastructure.
