Ontario Construction News staff writer
The Royal Institution of Chartered Surveyors (RICS), Association for the Advancement of Cost Engineering (AACE) and Canadian Institute of Quantity Surveyors (CIQS) have released the second quarter results for their North American Construction Monitor. The results they report are not surprising — the COVID-19 pandemic and the related economic lockdowns are having a significant impact on the construction industry globally, according to respondents.
Underlying these weaker numbers has been a predictable fall in headcount, profits and new business enquiries. Payment delays have inevitably increased with suggestions from respondents that the costs of materials used in construction have also been rising, RISC says in a statement.
“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,” said RISC chief economist Simon Rubinsohn. “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.”
Specifically in Canada, feedback around activity in the second quarter inevitably also reflected the impact of COVID-19. Forward looking indicators are a little more positive with infrastructure anticipated to drive recovery across the sector following a number of government announcements.
Private residential workloads are viewed as being broadly unchanged over the next 12 months but perceptions around private nonresidential activity remains a little more downbeat.
Although headcounts (measured in net balance terms) fell in the second quarter, hiring is viewed as likely to pick up over the next 12 months. Skills shortages are still perceived to be a problem for the sector, even if they are somewhat less visible than in previous quarters. The latest data shows the issue continues to be most marked in the areas of skilled labour and quantity surveyors.
“As the economy is slowly opening back up after several months of varying stages of a lockdown across Canada, the sheer magnitude of the COVID-19 pandemic’s impact at home and abroad is becoming more evident,” said CIQS CEO Sheila Lennon.
“Despite supply shortages and an expected increase in construction and material costs over the next 12 months, there is an anticipated increase in employment opportunities within our sector in response to the government announcement of a significant investment in infrastructure projects over the next few years.”
Profit margins are likely to compress further according to responses to the survey reflected in construction costs outstripping tender prices. For the coming year, average reading for the former is put at more than 4% according to contributors compared with a modest 1% rise in tender prices.
That said, for the time being, the majority of tenders being received are not ‘consistently’ below realistically produced estimates of costs. Predictably in the current environment, productivity is being impacted by the coronavirus related working arrangements on construction sites.
However, in the case of Canada, close to half the responses expect the loss of productivity to be in the 0 to 10% range. Around one-quarter see the impact being in the 10% to 20% range while around 15% envisage no loss as a result of the changed circumstances.
Survey methodology
Survey questionnaires were sent out on June 10 with responses received until 23 July. Respondents were asked to compare conditions over the latest three months with the previous three months as well as their views as to the outlook. A total of 1,816 company responses were received globally, 408 of which were from the UK. Responses in Canada were collected in conjunction with the Canadian Institute of Quantity Surveyors. Responses in the United States were collected in conjunction with the Association for the Advancement of Cost Engineering.