WASHINGTON, D.C., JUNE 21 – Construction backlog among the nation's largest contractors now stands above 12 months, a record for the series, according to Associated Builders and Contractors (ABC). The biggest firms with the greatest capacity to attract talent have been able to accept work that others have to turn away in a market that has stabilized at a comfortable level but still faces a skilled worker shortage.
Nationally, ABC said its Construction Backlog Indicator (CBI) inched down to 8.6 months during the first quarter of 2016, which represents a decline of 0.8 percent from 2015's final quarter. CBI has expanded by 2.7 percent on a year-over-year basis, however, which translates into an increase of more than 0.2 months.
"Contractors are no longer becoming busier, rather, the level of activity has stabilized at a reasonably high level," said ABC Chief Economist Anirban Basu. "Most contractors continue to express satisfaction regarding the amount of work they have under contract. This is of course truer in certain parts of the nation than others."
"Subcontractors are much busier than they were several years ago, with general contractors reporting greater difficulty securing experienced contractors," said Basu. "Some construction firms are turning away work for the first time in years. "The recent stabilization of backlog may reflect supply constraints as much as demand stagnation.
"That said, there are indications that certain commercial real estate segments are nearing the end of their development cycle," warned Basu. "Developers, bankers and regulators have become generally more concerned by the possibility of overbuilding in hotel, office and retail markets. Many developers indicate that the current cycle is much closer to its end than to its beginning. The implication is that for the first time in years, backlog may be poised to decline after recovering massively since early 2010."
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Regional Highlights
- Contractors in the South have reported average backlog in excess of 10 months for three consecutive quarters. This is unprecedented in the history of the series, with no other region accomplishing this.
- Backlog in the Northeast is no longer expanding, but remains above eight months, second only to the South. The Northeast continues to experience a considerable volume of activity related to commercial development, including in the form of fulfillment centers that exist at the heart of the e-commerce economy.
- Backlog in the West slipped during the year's initial quarter. Technology continues to generate profound levels of activity in markets like San Jose, Seattle, and San Diego, but firms working in infrastructure categories have tended to report shorter backlog than their counterparts elsewhere. Not surprisingly, California-based firms heavily influence western backlog, and that market is positioned to remain active with respect to the level of private construction.