COVID-19 crisis tanks nonresidential building market opportunities

According to Quarterly Market Forecast from PSMJ Resources, six of seven major markets saw a decrease in proposal activity

By Jerome Guerra May 7, 2020

Progressively weakening conditions combined with the COVID-19 crisis ignited a crash in proposal opportunities for most nonresidential building markets in the first quarter of 2020. Of the seven major nonresidential building markets measured, only health care recorded an increase in proposal activity when compared with the previous period, as reported in the Quarterly Market Forecast by publishing and consulting company PSMJ Resources.

The Commercial Development and Commercial User markets, with net plus/minus indexes of -51% and -47%, respectively, sank deep into negative territory unseen since the Great Recession of 2008-2009. Education (-12%), heavy industry (-17%), light industry (-5%), and government buildings (-8%) also recorded a negative NPMI for the first time in nearly a decade.

PSMJ’s NPMI expresses the difference between the percentage of firms reporting an increase in proposal activity and those reporting a decrease. A consistent group of more than 300 architecture, engineering and construction firm leaders participate regularly, with 288 contributing to the most recent survey. It was conducted March 24 to 30, 2020.

Health care bucked the negative trend, recording an NPMI of +27%, the best among all 12 construction markets assessed (including residential building and horizontal markets). Despite remaining above water, health care’s first quarter NPMI was still down 28% from the fourth quarter of 2019.

Courtesy: PSMJ Resources quarterly Market Forecast[/caption]

“Our workload hasn’t been impacted too much by the COVID situation yet,” said David Giangrande, PE, president and CEO of Design Consultants Inc., a civil engineering, transportation planning and land surveying company based in Somerville, Mass. “Even prior to the crisis, we were seeing slight erosion in commercial project opportunities. We’ve been doing a lot of mixed-use residential with a combination of office, hospitality and retail, but some of these have been transitioning to just residential. In a few cases lately, these mixed-use projects are being revamped into medical labs or biopharmaceutical space.”

Among nonresidential building submarkets assessed by the QMF survey, the four best-performing in the first quarter of 2020 were all in the health care market. Only eight of the 29 total nonresidential building submarkets were in positive territory, while the five worst performers were all in commercial submarkets.

Kevin Hinrichs, president of Taylor Design, said that new health care projects are proceeding for the most part, but health care clients have shifted their focus to address the current crisis. “Construction renovation projects within health care facilities are on hold in some cases to avoid disruptions to services,” said Hinrichs, whose California-based architectural, interior design and design strategy firm has substantial work in the health care field. “Some projects are accelerated to provide for improved care as needed for COVID-19 patients.”

data,” he said.

Consulting and publishing firm PSMJ Resources Inc. has been conducting the QMF survey since 2003. It is free to PSMJ members and subscribers.


Author Bio: Jerome Guerra is a principal with The JAGG Group, a consulting and communications company focused on the AEC industry.