Overall, proposal activity in the architecture/engineering/construction (AEC) space remains relatively stable as the industry navigates a mixed bag of headwinds in some areas and tailwinds in other areas. PSMJ’s latest Quarterly Market Forecast surveyed 179 AEC executives (collected between July 9, 2024 and July 26, 2024) and revealed an overall proposal activity Net Plus/Minus Index (NPMI) value of 23.0, which is comparable to the NPMI value of 24.9 for the same period in 2023. The study also tracks NPMI values in 12 key client markets and 59 submarkets.
Any NPMI value above zero indicates that more respondents are seeing an increase in proposal activity compared to the prior quarter (+100 indicates all respondents are seeing an increase in proposal activity, -100 indicates all respondents are seeing a decrease in proposal activity). Since proposal activity is a leading indicator for backlog, revenue, and—ultimately—cash flow, the latest NPMI values provide a valuable glimpse into cash flow over the next 12 to 24 months.
The story as of late for the AEC markets has largely been one of record levels of government spending bolstering public-sector markets while the private-sector markets take the blows associated with rising interest rates and other challenges. As we head into the second half of 2024, some relative stabilization across many markets has been a welcome sight but that won’t last forever. In the latest data set, the market with the largest swing upward was Commercial Developers with a +10.0 gain (driven largely by growth in the Warehouse Distribution and Office-to-Housing Conversion submarkets while the Office Buildings submarket struggles) while the market with the largest downward swing was Energy & Utilities that shed 22.8 points but remains strongly in positive territory after near-record levels of proposal activity.
“As an interest rate cut by the Fed in September seems all but certain at this point, that may mean that the worst of it is behind us for the Commercial markets,” states PSMJ President Gregory Hart. “But, the damage is done and the Office Buildings submarket is still in deeply negative territory. It could be some time before we see real relief and associated growth there. We also need to watch for any signs of potential cooling in the infrastructure markets that have been supported by IIJA spending. That won’t last forever as projects move into construction phases. In fact, some of the mixed markets like Healthcare and Education seem to have the strongest fundamentals right now with all of their respective submarkets consistently delivering double-digit NPMI performance.”
The following table summarizes the latest NPMI values by client market in the most recent period compared to the same period from one year ago:
Based on our latest Quarterly Market Forecast data, the following summarize the five markets with the highest NPMI values:
Market NPMI Value
Transportation 55.6
Water/Wastewater 54.0
Energy/Utilities 52.2
Environmental 48.8
Other Government Buildings 42.9
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