NEWTON, Massachusetts – Overall proposal activity growth remained essentially flat in the month of August, indicating that the architecture, engineering, and construction (A/E/C) industry has moved beyond the record-setting lows seen in the 2nd Quarter. After plummeting to a worst-ever -41% in April and -22% for the full 2nd Quarter, the overall Net Plus/Minus Index (NPMI) in PSMJ Resources’ Quarterly Market Forecast (QMF) survey rebounded to +2% in July and stayed relatively flat at +1% in August.
The Education market continues to struggle, tying for 2nd-worst among the 12 major markets with an NPMI of -29%, a slight dip from -26% in the July survey. Education has been lagging in the QMF for months, recording the lowest score among the 12 markets in the 4th Quarter of 2019 as well.
The NPMI represents the difference between the percentage of firms in the survey period that saw growth in overall proposal activity and those that saw a decrease. PSMJ has been conducting the QMF survey every three months since 2003. When the COVID-19 crisis hit, the firm began performing a monthly supplemental survey to track the pandemic’s effect on the industry on a timelier basis.
While the Healthcare market recovered enough to regain the top spot among the 12 major markets surveyed with an NPMI of 31%, and the Energy/Utilities sector grabbed second (29%), it was the Housing market’s performance that turned heads. After dropping to -19% in the 1st Quarter and -27% in the April supplemental survey, Housing’s NPMI has climbed steadily, reaching 27% in August (up from 15% in July and 2% in the full 2nd Quarter). Nearly half (45.8%) of respondents said that Housing proposals grew from July to August, while only 19.3% reported a decrease.
PSMJ Senior Principal David Burstein, P.E., AECPM, made the prescient observation in April that the Housing market would rebound rapidly beginning in the 3rd Quarter. “I conditioned this on the assumption that the health crisis would be behind us and, to a lesser degree, on movement on an infrastructure plan,” says Burstein. “Interestingly, we’re still in the midst of the crisis and the infrastructure plan hasn’t budged, but the Housing market has bounced back impressively, even exceeding pre-COVID levels.”
Quarterly Market Forecast – Overall Proposal Activity NPMI, Year-End 2007 to August 2020
The Commercial markets, which Burstein expects to recover by the late 3rd Quarter or the 4th Quarter, have not yet turned the corner. Among the 12 markets measured in August, Commercial Users (-36%) and Commercial Developers (-29%) lagged the field.
PSMJ Consultant Greg Hart, who manages the QMF, says Commercial markets appear to be a victim of the uncertainty that COVID brings. "This pandemic has accelerated the move away from bricks-and-mortar retail toward online retail. And renters of office space are now looking at permanent reductions in square footage as they allow more employees to work from home."
Healthcare, which was a top performer for the past several years, dropped into negative territory in April for the first time in the survey’s 17-year history when it fell to -8%. The dip was likely caused by the diversion of most healthcare-related resources to combatting or preparing to confront the COVID surge. With the situation under somewhat better control, and the enemy much more understood, normalcy seems to be largely returning to the Healthcare sector.
Quarterly Market Forecast – Major Market Proposal Activity, 4th Quarter 2019 to August 2020
Water/Wastewater, which COVID hasn’t hit as hard as other markets, held its own in August with a 20% NPMI, good for 4th-best ahead of Heavy Industry and Environmental (both 9%). Only the Commercial markets are performing worse than Education in 2020. The other markets assessed were Light Industry (0%), Transportation (-3%) and Government Buildings (-6%).
The August supplemental survey did not include questions about the 58 submarkets measured in quarterly surveys. PSMJ’s QMF has been a solid predictor of construction market health for the A/E/C industry since its inception in 2003. A consistent group of over 300 firm leaders participates, including 155 responding for the August supplement.
For more information or to receive a copy of the full Quarterly Market Forecast for August 2020 Supplementary Survey report, contact Jerry Guerra at 781-718-2403 or at [email protected].
About PSMJ: For more than 40 years, PSMJ Resources, Inc. has been recognized as the leading publishing, executive education, and advisory group devoted completely to improving the business performance of A/E/C organizations worldwide. http://www.psmj.com