Despite the influx of stimulus dollars, most contractors experienced diminishing backlogs
Los Angeles, CA (PRWEB) April 02, 2012
The Pre-Construction Services industry acts as a third-party manager, overseeing preparatory aspects of a construction project, including cost estimating, scheduling, designing and engineering. As such, the fall of the housing market and its subsequent strain on the financial sector set the stage for a stagnant commercial and institutional construction. The industry began to slow in 2008 and experienced steep revenue declines in 2009 and 2010 – 17.7% each year. “With demand declining and virtually nonexistent new construction from these downstream markets, industry demand dropped dramatically,” says IBISWorld industry analyst Nima Samadi. Despite the influx of stimulus dollars, most contractors saw backlogs diminish to unprecedented levels, causing profit to shrink. As a result, industry revenue is expected to fall at an average annual rate of 7.2% to $11.8 billion over the five years to 2012.
Reduced corporate profit, high unemployment and low consumer spending contributed to the Pre-Construction Services industry's decline as businesses stopped growing or contracted, which constrained demand for pre-construction services from new office space and commercial construction. According to Samadi, demand for pre-construction services from institutional and municipal markets were somewhat sheltered from the severe declines due to a lag in its largest market, state and local government investment. Additionally, pre-construction firms’ increasing array of responsibilities and moves toward diversification has provided new revenue opportunities for the industry and allowed firms to charge more for services. The industry also benefits from a longer-term trend toward construction companies outsourcing functions to third parties (such as pre-construction services).
After three years of consecutive revenue decline, the industry is expected to begin recovering in 2012, with revenue expected to grow 2.7% this year to $11.8 billion. Over the five years to 2017 revenue is projected to increase at an annual average rate of 4.3% to $14.5 billion. Industry growth will be driven by continued improvements in the US economy, with demand for construction (and subsequently pre-construction services) projected to steadily rise as businesses begin to expand operations and real estate values rebound. Because the industry relies so heavily on general economic activity, the number of firms is expected to increase over the next five years. While there are several large-scale firms that operate both domestically and internationally, such as Jacobs Engineering Group, AECOM Technology Corporation and URS Corporation, this industry is also characterized by many small-scale, often individual proprietors and partners that operate on a regional basis. For more information, visit IBISWorld’s Pre-Construction Services report in the US industry page.
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IBISWorld industry Report Key Topics
This industry acts as a third-party manager, overseeing preparatory aspects of a construction project, including cost estimating, scheduling, designing and engineering. It also acts as a third-party manager in regard to community relations, permitting, cost control and procurement.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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