Growth in construction and manufacturing activity, along with increased government consumption and investment, is projected to boost demand for demolition services
Los Angeles, California (PRWEB) December 06, 2014
Demolition services have a buyer power score of 2.5 out of 5. IBISWorld market research analyst, Eric Delgado, says, "This score reflects pricing trends that are forecast to limit the buyer's ability to negotiate in six-year period to 2017." Other factors that negatively affect buyer power are demolition services' high level of specialization, the buyer's inability to use substitutes for most demolition jobs and the risks involved with switching providers. However, low market share concentration positively affects buying power.
While 2011 to 2014 marked a period of high demand volatility from the construction sector, price growth is anticipated to remain stable in the three years to 2017. "This trend is forecast to arise from stabilized demand for the redevelopment of brownfield sites, as well as an increase in government investment in infrastructure and institutional construction, which account for a significant share of revenue for suppliers of demolition services," says Delgado. This highly fragmented market also encourages price-based competition among suppliers, which benefits buyer negotiating power. However, as the economy continues to recover, demand from key downstream markets like nonresidential construction will increase, which will give contractors more flexibility to raise prices. Rising demolition machinery prices and employee wages will pressure demolition contractors' profitability in the three years to 2017. As a result, prices will likely increase further during this period and weaken buyer power overall. Major vendors in the market include LVI Services, Penhall and NorthStar Group Holdings LLC.
Because demolition work is a capital-intensive service in which safety is important, there are no viable substitutes for a qualified demolition contractor. Additionally, buyers that switch contractors mid-job will face high switching costs due to delays in project completion and new startup costs. Furthermore, the number of operators that have the capacity to complete large-scale projects is considerably limited. These factors negatively affect a buyer's ability to negotiate. For more information, visit IBISWorld’s Demolition Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of demolition services. Demolition and wrecking companies provide total and selective demolition. Auxiliary services provided by these companies include recycling and concrete cutting. While these companies sometimes provide abatement and remediation, this report does not include those services. Buyers should refer to IBISWorld procurement report 5183863 for specific information on procuring environmental remediation services.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
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