Construction Outlook: Risk has increased in Commercial Construction

April 19, 2022

Comparing February 2022 with 2021 our data indicates that risk for commercial building has noticeably grown

Our regular data series, which we provide to the New Zealand Hardware Journal, assesses the level of credit risk posed by the four business sectors most closely associated with the Construction & Hardware industry:

  • Residential Construction
  • Commercial Construction
  • Hardware, Building & Garden Supplies Retailing
  • Core Retailing


Below is the New Zealand Hardware Journal’s commentary:

 

While our last update, reporting on January 2022, showed a noticeable risk increase across all four sectors and raised the expectation of further deterioration, February’s data show relatively negligible month-by-month movement in the higher risk bands, with any adverse movement more focused in the lower risk bands.

Indeed, says CreditWorks’ Alan Johnston: “Considerably more debt sits at present under the Current, and Current + 1, payment profiles, compared to this time last year – which is a good thing.

“This is probably a reflection of supply constraints in the market and the need / desire to keep suppliers happy, so where possible, the supply lines remain open.”

However, he adds: “We are still seeing strain in the Commercial Construction sector where currently the level of risk in the higher risk bands (20-80%) has increased threefold since February last year, from 0.5% to 1.4%.

“While still at manageable levels, the trend in this area does warrant concern and is worth monitoring over the coming months.”

 


Now see the charts below for a visual explanation of the last three months’ risk profiles across our four chosen sectors.

The left axis indicates the % of a sector that is at risk. The bottom axis shows the % likelihood of failure over the next 18 months.

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