Industry demand will improve, as investment in residential and commercial buildings rises.
Los Angeles, California (PRWEB) September 26, 2013
The Building Inspectors Industry is in a recovery phase, following years of decline. Building inspectors evaluate a building's structure, workmanship and compliance with building standards and zoning laws. Most of the industry's clients are homebuyers who hire inspectors to ensure that the house they are buying is up to par and meets regulatory conditions. Other clients include homeowners, commercial building buyers and parties involved in building construction. Inspectors were greatly affected by the housing downturn and recession. With existing home sales and housing starts plummeting, demand for industry services fell. Consequently, revenue declined and many participants exited the business. However, industry revenue followed the recent upswing in the real estate sector. Overall, industry revenue is expected to decline at an average annual rate of 0.9% to $2.3 billion in the five years to 2013, but grow 3.2% in 2013.
The recession saw major declines in existing home sales, housing starts and commercial real estate. In 2009, housing starts to fell 35.6% and the value of private nonresidential construction dropped 21.1%. This caused demand for industry services to shrink and revenue to fall. Since the industry is fragmented and mostly dominated by sole proprietorships, the lack of work directly forced many companies to exit the industry. Intense price competition also ensued, hurting profit. However, industry revenue and profit have recently picked up, as the housing market revived. Over the five years to 2013, existing home sales and housing starts are expected to rise by an annualized rate of 4.6% and 2.1%, respectively. The rise in real estate transactions also enticed many players to return to the industry, with the number of firms increasing by an average 0.8% annually to 21,338 during the period.
In the five years to 2018, the industry will continue to grow as a result of the housing recovery. Increasing existing home sales and other real estate transactions will drive demand for industry services. However, growth will be more subdued than pre-recession figures since the housing market will take a while to recover and lending will be more stringent. The number of building inspectors will also climb, increasing competition as a result. Additionally, it will become more important for operators to offer a wider range of services such as environmental assessment, in order to gain clients.
The industry is highly fragmented, with the four largest operators (three of whom are actually hundreds of franchises operating under a brand name) representing a mere 4.7% of industry revenue in 2013. The large number of nonemployers (sole proprietors or part-time inspectors) contributes to the highly fragmented nature of this industry. About 97.1% of industry enterprises are nonemployers or have fewer than five employees. Most businesses tailor toward local markets and inspector licensing, accreditation and knowledge base are usually not transferable between states. When the housing market collapsed, industry concentration slightly increased. Larger companies' resources, room to cut costs and brand recognition allowed them to better withstand declining demand for inspection services than their smaller rivals who were forced to exit the industry. However, as the housing market recovered, small firms and nonemployers reentered the industry in anticipation of increasing demand. Consequently, industry concentration has recently decreased.
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IBISWorld industry Report Key Topics
This industry includes companies that primarily perform inspections on buildings. When inspecting a building, all aspects of the structure and component systems are evaluated, and a report is prepared on the physical condition of the property. These reports are written for buyers and/or others involved in real estate transactions. Building inspection bureaus and companies that carry out home inspection services are also included in this industry.
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