'Cautiously Optimistic,' But Construction Sector Still Faces Challenges
Respondents to the US Construction Monitor reported payment delays, in addition to dips in profits and in new business inquiries.
The global pandemic is expected to keep pressure on profit margins in the North American industrial sector in the coming months, according to a new survey from RICS and the Association for the Advancement of Cost Engineering.
The COVID-19 crisis has had a significant impact on the construction sector, according to respondents participating in the second quarter US Construction Monitor, part of the North American Construction Monitor.
Respondents reported payment delays, in addition to dips in profits and in new business inquiries, the organizations said. Profit margins are expected to be squeezed as construction costs are projected to exceed tender prices, the groups said.
“The feedback to the monitor highlights the challenges construction businesses in North America are likely to face over the coming year with workloads anticipated to be flat at best away from the infrastructure sector and profits remaining under pressure,” Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS), said in a statement. “For the time being, the extent of underbidding is relatively modest both in the US and Canada which is encouraging but whether this can be sustained if the macro recovery continues to falter remains to be seen.”
RICS and Association for the Advancement of Cost Engineering (AACE) cited “lack of demand, financial constraints and regulatory issues” as leading factors harming the industrial sector.
In the second quarter, amid reportedly diminished workloads, the “Construction Activity Index” fell deeper, RICS and AACE said. The groups said the decline was seen starkly in private non-residential construction.
Still, the groups said that infrastructure is expected to be both more reliant and “actually see a return to positive growth, albeit at a slower pace than at the tail end of last year.” RICS and AACE said construction headcount, which reportedly fell in the second quarter, is now projected to stabilize.
“The Q2 survey represents the first full quarter to experience the COVID-19 pandemic impacts,” Chris Caddell, president of AACE International. “The concern and uncertainty it brings to the marketplace is reflected in these results. I am cautiously optimistic that the impacts will reduce with time, but there is so much we still don’t know.”