The recession caused the industry to suffer, but government funding sustained growth
Los Angeles, CA (PRWEB) May 08, 2013
The Municipal Building Construction industry includes a wide range of noncommercial markets, including healthcare, education, religious buildings and government offices. Direct government funding accounts for almost all education and public building construction, while the private sector funds most healthcare construction. “On the whole, though, the industry relies heavily on government investment for demand,” says IBISWorld industry analyst Matthew MacFarland. As such, the industry's performance during the past five years has been tied to the stimulus plan passed in response to the recession in 2009 and, in turn, to the slowdown in public expenditure as the stimulus tapered off and as balancing the federal budget by 2015 became a priority. During the past five years, industry revenue is expected to increase at an annualized rate of 0.1% to $8.4 billion, including a 3.0% contraction expected in 2013.
While the private sector stumbled briefly in 2009, the federal government's stimulus package created a boom in publicly funded construction, largely in the education market. These contracts, included both new-building construction, benefiting larger general contractors, and smaller-scale renovation and repair projects, which helped buoy smaller firms as well. Additionally, the influx of funding kept the pool of contracts from shrinking and allowed operators to avoid intense price-based competition. With stable pricing power, profit margins fell only slightly in 2009, and have recovered to near prerecession levels of about 8.2% in 2013.
The end of the stimulus and concerns over deficit spending have yielded a slowdown in government spending since 2011. Additionally, the Canadian economy's slowing growth in 2012 has hampered tax revenue and forced some reductions in construction funding. This trend is forecast to spill over into 2014, but once a balanced budget is achieved in 2015, IBISWorld projects normalized expenditure patterns that will smooth the volatility of recent years. According to MacFarland, continued economic recovery – particularly in the United States – will lessen the pressure to reduce funding for school and welfare construction and help industry revenue grow. During the five years to 2018, industry revenue is forecast to continue growing. The Municipal Building Construction industry has a low level of market share concentration, with the four largest companies in the industry estimated to account for less than 20.0% of industry revenue. The industry's largest two firms, PCL Constructors Inc. and Ledcor Group, hold a combined market share of about 16.5%. Construction industries are typically highly fragmented due to the wide geographic diversity of projects and the prevalence of local contractors who have personal relationships with developers and experience with local regulations and markets. For more information, visit IBISWorld’s Municipal Building Construction in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry constructs municipal and institutional buildings in the private and public sectors, including government buildings, churches, prisons, schools and healthcare facilities. Operators are usually general contractors and perform new work, additions, alterations and repairs, though they may also serve as construction managers.
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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