flexiblefullpage -
billboard - default
interstitial1 - interstitial
catfish1 - bottom
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

Multifamily Housing | Feb 14, 2024

Multifamily rent remains flat at $1,710 in January

The multifamily market was stable at the start of 2024, despite the pressure of a supply boom in some markets, according to the latest Yardi Matrix National Multifamily Report.

Student Housing | Feb 13, 2024

Student housing market expected to improve in 2024

The past year has brought tough times for student housing investment sales due to unfavorable debt markets. However, 2024 offers a brighter outlook if debt conditions improve as predicted.

Contractors | Feb 13, 2024

The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of January 2024

Associated Builders and Contractors reported today that its Construction Backlog Indicator declined to 8.4 months in January, according to an ABC member survey conducted from Jan. 22 to Feb. 4. The reading is down 0.6 months from January 2023.

Industry Research | Feb 8, 2024

New multifamily development in 2023 exceeded expectations

Despite a problematic financing environment, 2023 multifamily construction starts held up “remarkably well” according to the latest Yardi Matrix report.

Market Data | Feb 7, 2024

New download: BD+C's February 2024 Market Intelligence Report

Building Design+Construction's monthly Market Intelligence Report offers a snapshot of the health of the U.S. building construction industry, including the commercial, multifamily, institutional, and industrial building sectors. This report tracks the latest metrics related to construction spending, demand for design services, contractor backlogs, and material price trends.

Industry Research | Jan 31, 2024

ASID identifies 11 design trends coming in 2024

The Trends Outlook Report by the American Society of Interior Designers (ASID) is the first of a three-part outlook series on interior design. This design trends report demonstrates the importance of connection and authenticity.

Apartments | Jan 26, 2024

New apartment supply: Top 5 metros delivering in 2024

Nationally, the total new apartment supply amounts to around 1.4 million units—well exceeding the apartment development historical average of 980,000 units.

Self-Storage Facilities | Jan 25, 2024

One-quarter of self-storage renters are Millennials

Interest in self-storage has increased in over 75% of the top metros according to the latest StorageCafe survey of self-storage preferences. Today, Millennials make up 25% of all self-storage renters.

Industry Research | Jan 23, 2024

Leading economists forecast 4% growth in construction spending for nonresidential buildings in 2024

Spending on nonresidential buildings will see a modest 4% increase in 2024, after increasing by more than 20% last year according to The American Institute of Architects’ latest Consensus Construction Forecast. The pace will slow to just over 1% growth in 2025, a marked difference from the strong performance in 2023.

Construction Costs | Jan 22, 2024

Construction material prices continue to normalize despite ongoing challenges

Gordian’s most recent Quarterly Construction Cost Insights Report for Q4 2023 describes an industry still attempting to recover from the impact of COVID. This was complicated by inflation, weather, and geopolitical factors that resulted in widespread pricing adjustments throughout the construction materials industries.

boombox1 - default
boombox2 -
native1 -

More In Category


Construction Costs

New download: BD+C's April 2024 Market Intelligence Report

Building Design+Construction's monthly Market Intelligence Report offers a snapshot of the health of the U.S. building construction industry, including the commercial, multifamily, institutional, and industrial building sectors. This report tracks the latest metrics related to construction spending, demand for design services, contractor backlogs, and material price trends.



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