PSMJ's latest research shows that overall proposal activity in the architecture/engineering/construction (AEC) space remains relatively stable. However, digging deeper into the data, we see the real impact of recent interest rate cuts and other factors. PSMJ’s latest Quarterly Market Forecast surveyed 119 AEC executives (collected between September 26, 2024 and October 15, 2024) and revealed an overall proposal activity Net Plus/Minus Index (NPMI) value of 26.7, which is slightly higher than the NPMI value of 25.5 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.
For the past 18 months, the private-sector markets tied to speculative development have struggled under the weight of interest rate hikes by the Federal Reserve Bank (Fed). In September 2024, the Fed announced an interest rate cut of 50 basis points with more potential cuts coming in the future. “It would appear that was just boost that the Commercial and Housing markets needed.” states PSMJ President Gregory Hart.
In this survey, the Commercial Developers market NPMI value came in at 13.0, compared to -8.3 for the same period in 2023. “Unfortunately, the data still doesn’t support widespread growth in the Commercial markets. On the development side, this is being driven by the Warehouse submarket while the Office and Retail submarkets are still soft.” explained Hart, “and, in the Commercial Users market, Data Centers are a real bright spot as a result of the A.I. boom that is taking place right now.”
Hart also pointed out that it is too early to tell if the significant climb in the NPMI for the Housing market short-term statistical noise or the start of a trend. He also points out that there could be some market sentiment volatility associated with the 2024 election cycle in the United States.
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:
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