May Proposal Activity Rebounds from Record Low

NEWTON, Massachusetts – Overall proposal activity for the month of May rebounded from April’s historic lows in the PSMJ Resources Quarterly Market Forecast (QMF) survey of architecture, engineering and construction (A/E/C) firm leaders. The supplemental survey for just the month of May reported a Net Plus/Minus Index (NPMI) of -9%, an improvement from the -41% in April that was the lowest ever recorded in the 17-year history of the survey.

The NPMI represents the difference between the percentage of firms that saw growth in overall proposal activity and those that saw a decrease. This is the second consecutive month that PSMJ conducted a supplemental survey to assess the impact of the COVID-19 crisis. The consulting and publishing company has conducted the survey on a quarterly basis since 2003.

Despite the improvement from April, the May results remained in negative territory, where the overall proposal activity index had not been in nearly a decade. Eight of the twelve major markets assessed also showed improvement over the prior month, but were still far off typical levels recorded since the end of the Great Recession.

PSMJ’s Quarterly Market Forecast –
Proposal Activity Year-End 2007-May 2020

The Housing market improved markedly, up to -7% in May from -27% in April and -19% in the 1st Quarter of 2020. While still slightly negative, Housing’s increased activity may be a good sign for overall economic health as residential proposal activity tends to be a leading indicator for many other markets. David Burstein, PSMJ Senior Principal, says, “I expect to see a rapid rebound in housing and commercial development once the health crisis passes and the impact of record-low interest rates starts to be felt. Pent up demand should make its presence felt by the end of Q3, and even more so in Q4 if we see movement on an infrastructure bill.”

Water/Wastewater has been the most resilient of the major markets analyzed, holding the honor of being the only market to never fall into negative territory. Its +20% NPMI in May was far ahead of all other markets, following up on April results in which it was the only market in the positive (+5%).

By contrast, the Commercial Markets (Users and Developers) and Education offer the lowest level of proposal opportunity. Commercial Users (-35% in May up from -72% in April) and Commercial Developers (-43% from -60%) did show improvement, while Education continued to slide (-39% in May from -34% in April). These three markets lagged the field even before the COVID-inspired economic crash. Education (+23% in the 4th Quarter of 2019) and Commercial Users and Developers (+26% and +24% respectively in 4Q19) were the three of the four worst performers in 2019’s final quarter.

Health Care (+5% in May up from -8% in April), Light Industry (+3% from -24%) and Environmental (0% from -30%) bounced back nicely in May. The Transportation market dipped to -9% from -6%, but never reached the depths of other markets. Rounding out the dozen are Heavy Industry (-8% from -23%), Energy/Utilities (-4% from -3%), and Other Government Buildings (-13% from -15%).

PSMJ’s Quarterly Market Forecast –
Proposal Activity by Major Market 4Q19-May 2020

The May supplemental survey including 173 responses, but did not include questions about the 58 submarkets measured in the quarterly surveys. PSMJ’s QMF has proven to be a solid predictor of construction market health for the A/E/C industry since its inception in 2003, with a consistent group of several hundred architecture, engineering and construction leaders responding.

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