CRE Construction Index Shows Glimmers of Hope

While the US Chamber of Commerce Commercial Construction Index for the third quarter of this year rose from the second quarter—to 57 from 56—the new score remains markedly lower than results from before Coronavirus-induced shutdowns. In the first quarter of 2020, the Index score was 74.

Still, some glimmers of hope can be found in two components of the Q3 Index—confidence in the construction market and revenue expectations—both of which increased over the second quarter, while the backlog of projects fell.

Confidence rose by six points to 56 as 82% of contractors expressed “moderate to high confidence that the US market will provide sufficient new business opportunities in the next 12 months.”

At the same time, contractors are optimistic about money coming in. Revenue expectations moved up four points from the second quarter to 48 as projects that were stalled because of the shutdowns were restarted. However, the score was 70 in the pre-pandemic first quarter.

But the ratio of average current to ideal backlog declined by five points in 68 in the third quarter; it was 76 in Q1. It may decline further as the US Chamber noted that the “impact to backlog from the current crisis may lag for several months as projects are delayed.”

The data regarding the status of project delays was similarly mixed. A majority of contractors, 85%, reported delays. But, providing a glimmer of hope, the number of delays taking place are shrinking as time marches on and society starts to get back to normal; or at least, the “new normal.” In April, 39% of contractors said more than half of their projects were delayed, but in July that number fell to 19%.

Workforce issues continue to plague construction. More than one in three contractors who report challenges in acquiring skilled labor—or 36%—also admitted to turning down work due to shortages of skilled labor, a spike from 32% in the second quarter. In another bright spot though, the number of contractors who have fewer projects because of the pandemic fell by 10 points, to 38%.

And contractors are rising to the challenge of Coronavirus, according to the report. “Despite some challenging circumstances due to the coronavirus pandemic in the larger economy, most contractors are aiming to keep the staff they have and very few are looking to downsize.”

Further, an overwhelming majority have made safety adjustments, with 82% providing personal protective equipment to employees, 75% changing procedures to incorporate social distancing, and 67% allowing office workers to do their jobs remotely.