« Back to Facilities Management News Home

« Facilities Management

Nonresidential Construction Index Drops Five Points

FMI Reports Low-Bid Work with Rising Material and Labor Costs Add to Industry Losses

NRCI = 54.8

RALEIGH, N.C. – FMI (www.fminet.com), the largest provider of management consulting and investment banking to the engineering and construction industry, announces the release of its Third Quarter Nonresidential Construction Index Report. Plunging 5 points, the index is back to Q2-2010 levels.

Notably, confidence in the economy by panelists took a huge hit, dropping 24.7 points. “Beware of the upturn,” is the sentiment expressed by a number of panelists. They raise concerns that too many contractors have been taking on too much low-bid work just to keep their backlogs full. The result is businesses are becoming unable to finance ongoing losses.

On the rise is the number of contractors participating in self-funded projects as a financing partner with owner/developers. One panelist stated, “Eighty-five percent of our work is being funded through self-funding or in some case, equity investors.” This is due in part to fewer bank loans for construction. Add to this rising material and labor costs, as well as lower project management fees and profit margins, and the result is an upturn in bankruptcies for industry firms. Nearly a third of NRCI panelists have seen a decline in trade contractors, with more than 10% noting fewer general contractors and design firms.

If there is a bright side, temporary gains in the economy have been enough to boost sales and release some projects that have been on hold for a long time. The result is that panelists report that their backlogs have improved somewhat. This is the first time backlogs have shown improvement since the second quarter of 2011.

To download a copy of the full report, click here. For reprint permission or to schedule an interview with the author, please contact Sarah Vizard Avallone at 919.785.9221 or savallone@fminet.com.

About FMI
FMI is the largest provider of management consulting, investment banking and research to the engineering and construction industry. We work in all segments of the industry providing clients with value-added business solutions, including:

    Strategy Development
    Market Research and Business Development
    Leadership and Talent Development
    Project and Process Improvement
    Mergers, Acquisitions and Financial Consulting
    Compensation Data and Consulting

Founded by Dr. Emol A. Fails in 1953, FMI has professionals in offices across the U.S. FMI delivers innovative, customized solutions to contractors; construction materials producers, manufacturers and suppliers of building materials and equipment, owners and developers, engineers and architects, utilities, and construction industry trade associations. FMI is an advisor you can count on to build and maintain a successful business, from your leadership to your site managers. For more information, visit www.fminet.com.

More From 11/7/2012 on FacilitiesNet