PROPOSAL ACTIVITY REBOUNDS ACROSS MOST MARKETS IN 3rd QUARTER

Proposal activity for architecture, engineering and construction (A/E/C) firms bounced back into positive territory after a 2nd Quarter result that was its worst in more than 11 years. The 3rd Quarter Net Plus/Minus Index (NPMI) of 10% in PSMJ Resources’ Quarterly Market Forecast still came up shy of its pre-COVID performance – other than the 2nd Quarter slump, this was the economic indicator’s lowest result in nine years – but it represented a marked improvement from the -22% recorded in the April-June quarter.

PSMJ’s NPMI expresses the difference between the percentage of firms reporting an increase in proposal activity and those reporting a decrease. The QMF has proven to be a solid predictor of construction market health for the A/E/C industry since its inception in 2003.

Among other financial indicators tracked by the survey, Backlog was a flat 0%, improving from -24%, while the quarter-over-quarter Revenue result improved from -16% in the 2nd Quarter to -6%. Projected Revenue for the 4th Quarter was also a flat 0%, meaning the same percentage of firms expect revenue to grow as expect to see it decline next quarter. Projected Revenue’s NPMI was -5% in the 2nd Quarter.

Quarterly Market Forecast – Proposal Activity NPMI
3rd Quarter 2003 to 3rd  Quarter 2020

Of the 12 major A/E/C markets measured by the QMF, Housing set the pace with an NPMI of 38%. Water/Wastewater, which has held up remarkably well during the COVID-19 crisis, followed closely at 37%. Healthcare (30%), Energy/Utilities (28%), Light Industry (27%) and Environmental (23%) rounded out the top six.

Proposal activity for Education projects was the worst performer in the 3rd Quarter with an NPMI of -36%, meaning it was under water for all of 2020, an at increasingly worse levels. Next were Commercial Users (-31%) and Commercial Developers (-21%), with Other Government markets (-9%) and Heavy Industry (0%) capping the bottom five. Transportation (10%), the sixth-lowest market, nonetheless showed solid improvement from the 2nd Quarter NPMI of -10%.

Among the 58 submarkets tracked, the number with a positive NPMI leaped to 30 in the 3rd Quarter from only 16 in the 2nd Quarter. The highest NPMI among submarkets was Water Treatment (+48%) followed by Renewable Energy (+46%) and Continuing Care Facilities (+42%). The worst performers were not surprisingly in the Commercial and Education markets. Restaurants (-77%), Hotels (-67%), Offices for Lease and Retail for Lease (both -55%), and Office Buildings (-49%) repeated as the five worst, with Support Facilities for Education (-48%) a close sixth. The top 10 performers’NPMI ranged from 32% to 48%, which compared very favorably to the 2nd Quarter when the range was 13% to 30%.

Other encouraging signs among submarkets includes that three of the six Transportation submarkets were positive, compared with zero in the 2nd Quarter. All four of the Healthcare submarkets were positive after only one was in the 2nd Quarter, and the 10 worst NPMIs improved slightly over the 2nd Quarter.

PSMJ’s Quarterly Market Forecast –
Best/Worst Submarkets 3rd Quarter 2020

 Best Performing Submarkets (Market)NPMIWorst Performing Submarkets (Market)NPMI
Water Treatment (Water/Wastewater)+48%Restaurants (Commercial Users)-77%
Renewable Energy (Energy/Utilities)+46%Hotels/Motels (Commercial Users)-67%
Continuing Care Facilities (Healthcare)+42%Office Bldg – Lease (Commercial Developers)-55%
Warehouse/Distribution (Light Industry)+40%Retail – Lease (Commercial Developers)-55%
Multifamily (Housing)+40%Office Buildings (Commercial Users)-49%
Single-Family Individual Homes (Housing)+40%Support Facilities (Education)-48%
Wastewater Treatment (Water/Wastewater)+39%Higher Education Facilities (Education)-39%
Transmission/Distribution (Energy/Utilities)+37%Sports Facilities (Other Government Bldgs)-38%
Water Supply (Water/Wastewater)+35%Wetlands Delineation (Environmental)-36%
Water Distribution (Water/Wastewater)  +32%Petroleum Facilities (Heavy Industry)-35%


PSMJ has been using the QMF as a measure of the design and construction industry’s health every quarter for the past 17 years, assessing the results overall and across 12 major markets and 58 submarkets. The company chose proposal activity because it represents one of the earliest stages of the project lifecycle. A consistent group of over 300 firm leaders responds each quarter, including 162 for the most recent quarter.

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