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Report: Commercial Contractors Optimistic

Tuesday, March 23, 2021

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The first-quarter report from the U.S. Chamber of Commerce Commercial Construction Index has been released, and the data reveals that contractors are growing more optimistic about their outlooks, reportedly driven by a rise in revenue expectations.

Outlooks on hiring and equipment spending plans have also improved while COVID-19 concerns recede.

The Findings

In general, 36% of contractors expect their revenue to increase over the next year; this is an 11% jump from just last quarter, Q4 2020. Other notable data points include:

  • 87% expect their revenue to either stay the same or increase;
  • 86% of contractors also report a moderate to high level of confidence that the U.S. market will provide enough new business in the next year;
  • while 24% report a high level of that confidence.
Janifest / Getty Images

The first-quarter report from the U.S. Chamber of Commerce Commercial Construction Index has been released, and the data reveals that contractors are growing more optimistic about their outlooks, reportedly driven by a rise in revenue expectations.

In terms of hiring:

  • 46% of contractors say they will employ more people in the next six months;
  • 46% also expect to keep the same number of workers; and
  • just 3% expect to reduce their staffing.

“As vaccines continue to roll out, contractors are expecting to hire more workers and anticipating good times ahead. The industry still has a way to go to return to pre-pandemic levels, but rising optimism in the commercial construction industry is a positive sign for the broader economy,” said U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley.

“However, finding skilled workers was a critical issue before the pandemic, and while it has remained a chronic problem over the last year, heightened concern may be emerging again as contractors look to hire. The U.S. Chamber is committed to supporting businesses in retraining and making sure the economy has the skilled workforce it needs.”

As states, the data confirms that concerns around skilled workers and raw materials prices remain. Some of those numbers include:

  • 85% of contractors report moderate to high levels of difficulty finding skilled workers;
  • with 45% reporting a high level of difficulty;
  • 88% report a moderate to high degree of concern about their workers having adequate skill levels;
  • with 46% reporting a high degree of concern; and
  • 94% contractors who reported a moderate to high degree of concern expect the problem with workers having adequate skill levels will stay the same or get worse in the next six months.

In terms of materials costs and spending:

  • 71% of contractors say they face at least one material shortage;
  • 22% of those are experiencing a shortage of wood/lumber;
  • 82% of contractors say cost fluctuations have a moderate to high impact on their business;
  • while 43% said wood/ lumber is the product of most concern (followed by steel, 35%, and copper, 27%;
  • 35% contractors say steel and aluminum tariffs will have a high to very high degree of impact on their business in the next three years;
  • 37% of contractors plan to increase spending on tools and equipment; and
  • 80% of contractors are still experiencing delays due to COVID-19, with an average share of 23% of their projects delayed, but that share is expected to drop to 15% looking ahead six months.

Lastly, 58% of contractors say worker health and safety remains the top concern for their business, followed by project delays and shutdowns (50%), fewer projects in general (35%) and building product availability as a whole (33%).

Other Recent Data

While numbers throughout the pandemic have favored commercial and residential construction, the Associated General Contractors of America released data at the beginning of the year in its “2021 Construction Hiring and Business Outlook Report,” which was based on survey results from more than 1,300 firms from all 50 states and the District of Columbia, found that the majority of contractors expect demand for many types of construction to shrink in 2021.

“The percentage of respondents who expect a market segment to contract exceeds the percentage who expect it to expand—known as the net reading—in 13 of the 16 categories of projects included in the survey,” the association said. “Contractors are most pessimistic about the market for retail construction, which has a net reading of -64%. They are similarly concerned about the markets for lodging and private office construction, which both have a net reading of - 58%.”

Some other net readings include:

  • -40% - higher education construction;
  • -38% - public building construction;
  • -27% - K-12 school construction;
  • +4% - warehouse construction; and
  • +11% - medical construction.

While the details of the different subsects of commercial projects remains murky, the National Home Builders Association recently dubbed the residential (more specifically home remodeling) market “more than fully recovered” from the pandemic.

More specifically, over the next two years the NAHB predicts that remodeling spending for owner-occupied, single-family homes will increase 4% this year and another 2% next year.

Other professionals again have noted that demand and backlog remain high, and the biggest factors that are prohibiting the sector to grow more are materials prices and labor shortages.

   

Tagged categories: Commercial Buildings; Commercial Construction; Commercial contractors; Economy; Good Technical Practice; Jobs; Market data; NA; North America

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