How to Measure Construction Industry Performance

How to Measure Construction Industry Performance

The construction industry is a vital component of the global economy, representing a substantial portion of gross domestic product in many countries.

Understanding the dynamics of this sector requires a deep dive into various metrics and statistics to gauge its health and direction.

Here we’ll outline the essential metrics used to measure construction activity, offering insights for contractors, investors, government bodies, economists and other stakeholders.

1. Construction Spending & Cost Estimation

The construction spending metric reflects the total expenditure on construction projects over a specific period. Breaking down this spending into sectors like residential, commercial, and public construction offers a nuanced view of the industry.

Importantly, historical or past construction spending will serve as a reference point and have some influence on future cost estimations – one of the most important steps in construction project management.

A cost estimate is a prediction provided by an estimator based on all available data serves as the baseline of the project cost at various stages in project development.

2. Building Permits Issued

A building permit is official permission provided by the government department of building or the building regulators to proceed with a new construction project. Obtaining a building permit is crucial before moving ahead with any planned property alterations or construction.

The number of new building permits granted by governments is a forward-looking indicator, measuring current real estate market demand, performance of the industry, predicting future construction activity and overall economic vitality.

A building permits report provides nationwide and location specific detail which can pinpoint which local regions fuel the economy, and governments can use this info to make decisions around funding and where to direct investments.

3. Demolition Approvals

Generally, the type of permits required will depend on a couple of factors:

  • Local council specifications and rules, and
  • What is being demolished, how much is being demolished and where.

In most cases, demolition approval (or similar) is required to demolish a building or structure.

Though not always, construction frequently follows demolition, making demolition approvals a rough indicator of future construction activity.

4. Construction Starts

Construction starts measure the initiation of new construction projects, and where available, the value of these projects. These metrics are a key economic indicator and when tracked over time, will help measure market trends.

Building construction

5. Housing Starts and Completions

In the residential sector, tracking housing projects commenced, completed, under construction, and in the pipeline, along with the value of these projects, is essential for gauging market health and predicting supply to meet housing needs for the future.

In Australia, the Urban Development Institute of Australia’s latest report shows that the federal government will fall short of its goal to build 1.2 million home by mid-2029. This is due to a “large backlog of properties that have been approved that are yet to be completed” said Westpac chief economist Luci Ellis, who admits there are a lot of factors contributing to this production issue.

6. Architectural Billings Index – United States of America (USA)

Produced by the AIA Economics & Market Research Group, the Architectural Billings Index (ABI) is a leading economic indicator in the USA that reflects the demand for non-residential construction, including commercial and industrial structures. The ABI gauges whether billing activity for the previous month grew, declined, or remained flat. This measure forecasts construction spending by reflecting the lead time between architectural billings and construction expenditure. A positive ABI can be a sign of strength or resurgence in the broader economy, while a negative ABI can signal weakness or an impending downturn.

7. Construction Backlog Indicator – USA

In 2008, the Associated Builders and Contractors introduced the Construction Backlog Indicator (CBI) to forecast the volume of upcoming work for commercial and industrial contractors. This indicator centres on the commercial, institutional, industrial, and infrastructure construction sectors in the USA.

Backlog, as defined by ABC, represents “the dollar value of contracted work to be completed in the future” by construction firms.

To calculate backlog, the formula is:

(Current month’s backlog value in dollars) / Fiscal year revenues (base year) x 12 = Total months of contracted work ahead

CBI provides a view of the volume of construction work in the USA contracted but not yet executed which can serve as a predictor of future activity and industry momentum.

A higher backlog generally implies a more optimistic outlook for the construction industry, while a lower backlog suggests the opposite.

8. Employment in Construction

Job numbers in the construction sector can reveal much about the industry’s health and future growth prospects, including an indicator of any labour shortages, and construction activity and economic impacts.

9. Cordell Construction Cost Index (CCCI)

The Cordell Construction Cost Index (CCCI) is a quarterly industry benchmark that tracks and monitors the movement of building work costs for stand-alone houses. It is a valuable metric which tracks changes in construction costs, including labour costs, services, building material prices, regulatory expenses, equipment and includes expert commentary on key market factors. It is vital for understanding market dynamics, pricing trends and industry comparisons.

10. Equipment Usage

The usage rates of various types of equipment and their deployment in residential, commercial, and industrial segments can offer insights into ongoing industry activity. This data can unveil changes and trends in equipment types, across global regions, segments, and provide an indicator of market share, growth and overall size of the market.

Demolition

11. Construction Productivity

Construction productivity is often measured as output per labour hour. Or in other words, how much work is done during time spent doing it.

Productivity metrics indicate efficiency levels and the there are a number of factors which can impact productivity such as labour characteristics, work condition and non-productive activities, as documented in a Carnegie Mellon University study.

Improving productivity is often in the best interests of stakeholders such as project managers, construction firms, engineers, architects, investors and financiers, regulatory bodies and government agencies, environmental groups and the general public.

Productivity in the construction sector is an important measurement to track as it can impact the ability to deliver outcomes such as housing and infrastructure a country needs to accommodate population changes, the new energy assets required to meet requirements or even a country’s decarbonisation goals.

Construction workplace safety

12. Safety Metrics

All workers have the right to a healthy and safe working environment.

Statistics on work-related injuries, incidents, accidents, fatalities, and safety violations are crucial for assessing the industry’s commitment to safe construction practices and the proposal and implementation of new measures to protect both workers and bystanders.

13. Sustainability and Green Building Metrics

These metrics evaluate a project’s environmental impact and adherence to sustainability principles, both increasingly important in modern construction.

With more and more organisations investing in corporate sustainability and building sustainability strategies and goals, these metrics are important to measure and increase transparency around planning, design and development practices.

The Proptech Cloud’s Environment and Energy Efficiency data contains energy supply data and NABERS energy rating data which may help guide decisions on energy sourcing as part of a sustainability strategy.

14. Supply Chain Metrics

Measuring and analysing the efficiency of the supply chain, including the availability and cost of materials, procurement, processing and distribution of goods helps to anticipate potential construction project impacts such as delays or cost overruns.

Improvements in mathematical models, data infrastructure and the expansion and availability of applications provide deeper insights, while improving forecasting, efficiency and responsiveness in supply chain management.

What Do These Metrics Tell Us

Understanding these diverse metrics is essential for anyone involved in analysing the construction industry as they provide a comprehensive view of the sector’s performance, trends, and economic impact.

Analysts will often use a combination of these metrics and measurements to make conclusions, predictions or decisions regarding the property market.

And by keeping a close eye on these indicators over time, industry professionals can make better decisions, improve market condition forecasts, and more accurately assess the overall health and vitality of the construction sector.

 

Australian Construction Activity Data

The Proptech Cloud’s Construction Activity dataset contains Australian construction activity statistics which may be helpful for planning, demand forecasting and construction cycle timing.

Subscribe to our newsletter

Subscribe to receive the latest blogs and data listings direct to your inbox.

Read more blogs from The Proptech Cloud

Crafting a Storm Surge and Hurricane Risk Rating for Coastal Properties

A high-level approach to developing a storm surge and hurricane risk rating system to guide stakeholders with a vested interest in coastal properties.

How Proptech Is Revolutionising Real Estate

Proptech is the dynamic intersection of property and technology, and it’s reshaping real estate. And there’s still a huge potential for growth.

What is the Australian Statistical Geography Standard (ASGS)?

The ASGS is used to better understand where people live and how communities are formed.

How to Incorporate Mesh Blocks into Datasets

Mesh blocks can enhance the precision and relevance of geospatial and proptech analyses. Here are some tips and steps to incorporate mesh blocks into datasets.

Australia’s Migration Trends: Where Are People Moving To?

This detailed visual analysis for Australia’s major capital cities breaks down how net migration trends are evolving across different regions.

Top 11 Uses for Weather Data in Real Estate

Top 11 Uses for Weather Data in Real Estate

Weather data plays a significant role in many facets of real estate.

Businesses involved at each stage of the property lifecycle across a range of industries and professions use weather data, together with other key data points, to make important strategic decisions.

Here we highlight the top 11 property-related processes where weather data serves as a valuable tool and why.

Zoning and land use

1. Zoning and Land Use

Government bodies and local councils consider weather data in planning decisions about zoning, development and land use to ensure the safety, sustainability, and functionality of urban areas. Examples include flood risk assessment, to avoid and manage heat islands, wildfire risk assessments, infrastructure resilience and emergency preparedness.

2. Location Selection, Urban Planning and Development

Urban planners and developers use historical data to make informed decisions about where to build new properties and infrastructure.

This data can help them identify areas with low risk of natural disasters and favourable climate conditions, which can impact liveability and attract more buyers and tenants.

Similarly, real estate developers and businesses considering new locations could use this data to make informed decisions about where to invest. Climate considerations affect the attractiveness of a location for both residential and commercial purposes. Investors in real estate often rely on historical data to formulate their investment strategies.

3. Building Design

Weather data has a substantial influence on building design and the choice of materials when creating structures that are not only functional but also durable, energy-efficient, and comfortable.

Heating and cooling, orientation, precipitation, weather events, energy efficiency and sustainability are just a handful of the factors considered by architects, engineers, and construction professionals in building design.

As weather patterns develop, longer-term planning of climate resilient developments that can withstand climate changes will rely on historical weather trends and patterns.

Weather data influences building design

4. Construction Planning and Forecasting

Weather data is used very broadly in building construction.

Project scheduling of weather dependent tasks and site preparations; optimising resources, tradespeople and equipment; safety planning; the handling, logistics and protection of construction materials; environmental compliance all factor into construction planning and building contractual agreements.

Weather has such a profound impact on productivity and safety in the construction industry that a host of construction software, apps and technologies have emerged to improve the efficiency of planning, communication and management procedures and build resilience. And the companies developing this construction software incorporate weather data!

An example is UBIMET, an organisation specialised in high-precision meteorology and international weather services. Their range of offerings include weather solutions that allow construction companies to make informed decisions about their development projects.

5. Innovative Data-Based Engineering and Concept Designs

Weather data could be used in research and development, design or data-driven engineering (a framework for a new approach to technical product development), particularly of smart products in our built environment.

Engineers and designers can use this data to help plan, redesign and improve the design process and verify design concepts¹.

Smart products in the built environment
Seasonal property demand is influenced by weather

6. Seasonal Property Demand

At a simplistic level, weather data can help predict seasonal fluctuations in property demand, both in purchase and rental.

Real estate agents, and holiday rental marketers often use this data to target regions, seasons, highlight favourable weather conditions and seasonal attractions when promoting properties and timing campaigns.

For instance, a beachfront property may be marketed with historical or even real-time weather data showcasing sunny days and warm temperatures.

7. Property Protection, Maintenance and Repairs

Property managers may reference historical data to safeguard properties, anticipate environmental wear and tear, and gauge maintenance and repair needs, particularly in regions with higher risks of severe or extreme weather incidences.

Weather data is crucial in assessing suitability of land for agricultural purposes

8. Agricultural Real Estate

In rural areas, weather data is crucial for assessing the suitability of land for agricultural purposes.

Historical data can provide insights into factors like rainfall patterns, temperature ranges, and frost dates, which are vital for farming and land use decisions.

9. Risk Assessment

Weather and climate risk impacts all real estate assets in a broad sense. Weather data can help assess the potential risks associated with a property.

Historical data allows buyers, sellers, and investors to make informed decisions regarding property investments by understanding the past occurrences and potential risks.

Real estate risk assessments influence building design and construction; investor and asset manager decisions; insurance industry processes; banking and home loans; government resourcing and funding of community assistance services, policies and programs, just to name a few.

It has also given rise to a host of proptech tools, which ingest this weather data, to help stakeholders assess the risk to their real estate assets. An example of a climate risk report tool is ClimateCheck, and The World Bank offers climate and disaster risk screening tools designed to build resilience measures into project design.

Weather data plays a role in the valuation of property

10. Property Valuation

Historical weather data, among other factors, impact property prices and property valuation. While it may not be the sole determinant of property value, it can influence valuations, particularly in areas of weather-related risks.

And weather conditions can also impact insurance costs, desirability, liveability and saleability. Banks, real estate agents, government bodies and councils, property developers and investors are amongst those who would have a vested interest in the valuation of a property.

11. Insurance Planning

Weather data is vital for insurance planning.

Property owners or tenants rely on historical weather data to assess the risk of damage from weather-related incidents such as storms, flooding, or wildfires. This information can help them choose the right insurance coverage and understand potential insurance costs.

On the flip side, insurance companies use weather data to analyse and assess the risk when calculating premiums associated with insuring a property. Data analytics of weather information could also assist as a tool in identifying potential fraudulent cases.

Weather data has a versatile range of uses and plays a crucial role in all areas of the property lifecycle.

And judging by the range of weather intelligence software in market, weather data also plays a crucial role in software development to aid a wide range of industries, not just in real estate.

Weather data not only enhances property-related decisions but also fuels innovation in proptech, ushering in a new era of data-driven solutions that may help guide the buying, selling, construction and management of properties.

 

Source:
¹Ang Liu , Yuchen Wang , Xingzhi Wang, (2022) Data-Driven Engineering Design, Switzerland: Springer Cham

Weather Data Listings

The Proptech Cloud curates a range of weather data listings for use in real estate processes and analysis.

Subscribe to our newsletter

Subscribe to receive the latest blogs and data listings direct to your inbox.

Read more blogs from The Proptech Cloud

Crafting a Storm Surge and Hurricane Risk Rating for Coastal Properties

A high-level approach to developing a storm surge and hurricane risk rating system to guide stakeholders with a vested interest in coastal properties.

How Proptech Is Revolutionising Real Estate

Proptech is the dynamic intersection of property and technology, and it’s reshaping real estate. And there’s still a huge potential for growth.

What is the Australian Statistical Geography Standard (ASGS)?

The ASGS is used to better understand where people live and how communities are formed.

How to Incorporate Mesh Blocks into Datasets

Mesh blocks can enhance the precision and relevance of geospatial and proptech analyses. Here are some tips and steps to incorporate mesh blocks into datasets.

Australia’s Migration Trends: Where Are People Moving To?

This detailed visual analysis for Australia’s major capital cities breaks down how net migration trends are evolving across different regions.