Demand for construction will rise as the economy strengthens and hiring picks up.
New York, NY (PRWEB) September 04, 2014
The Commercial Building Construction industry struggled immensely during the recession. The collapse of the housing market and its subsequent strain on the financial sector set the stage for a stifled business sector with little need for new commercial space. A tightened credit market, high unemployment and low consumer spending also contributed to the industry's decline as businesses downsized or closed shop, which halted demand for new office, retail and warehouse construction. Stagnant growth in per capita disposable income also cut into demand for the hotel and recreation market. As a result, industry revenue is expected to fall over the five years to 2014.
Commercial construction typically lags behind the overall economy by one to two years, due in part to the length of construction contracts and the pipeline of projects that general contractors keep on the books. Industry revenue began to shrink in 2009 and continued through 2010. During those years, most contractors' backlogs dried up, and many operators cut prices to stay competitive, leading profit margins to narrow significantly. Additionally, strong demand from key downstream markets has caused an increase in demand for new commercial construction. While improving economic indicators are excepted to benefit the industry, the Producer Price Index states that materials for warehouse and office construction have gone up, bumping up operators’ fixed costs. According to IBISWorld Industry Analyst Danielle Karvess, “overall improvements across the US economy will boost strong industry growth during the next five years, with the need for new construction returning as businesses expand to meet growing consumer demand.” Over the five years to 2019, industry revenue is anticipated to grow.
The Commercial Building Construction industry has a low level of market share concentration, with the four largest companies holding a relatively small share of industry revenue. “The largest players are multinational general contractors (GCs) with the resources and staff to handle massive, lucrative contracts for state-of-the-art structures like super skyscrapers and professional sports arenas. However, most participants in the industry are small-scale GCs that serve a narrow, local geographic region,” Karvess says. As such, more than one-half of industry enterprises employ fewer than five people and often work as subcontractors for larger firms.
For more information, visit IBISWorld’s Commercial Building Construction in the US industry report page.
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IBISWorld industry Report Key Topics
The Commercial Building Construction industry includes companies that are primarily responsible for work on the construction (i.e. new work, additions, alterations, maintenance and repairs) of office, retail, hotel, agricultural and entertainment buildings. Participants are general contractors or project managers. This industry excludes institutional buildings (e.g. hospitals and schools), heavy industrial buildings (e.g. factories and power plants) or infrastructure (e.g. communications towers or oil pipelines).
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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