Los Angeles, CA (PRWEB) May 12, 2013
Few industries suffered more during the recession than the Commercial Building Construction industry. 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 hotel and recreation market demand,” IBISWorld industry analyst Matthew MacFarland says. As a result, industry revenue is expected to fall at an annualized rate of 8.5% to reach $194.5 billion during the five years to 2013.
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. “Revenue for the Commercial Building Construction industry began to contract in 2008, and then plummeted in 2009 and 2010,” MacFarland says. During those years, most contractors' backlogs dried up and many operators cut prices to stay competitive, leading profit margins to significantly narrow. Margins are expected to make up some ground in 2013, showing modest improvement as economic recovery stimulates demand for new commercial construction and as operators gradually regain pricing power.
The Commercial Building Construction industry has a low level of market share concentration, with the four largest companies holding a combined market share of less than 5.0% of industry revenue. The largest players (Turner Construction Company, Tutor Perini Corporation, Clark Construction Group LLC and Whiting-Turner Contracting Company) 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. While the industry's largest firms sometimes expand through mergers and acquisitions to gain market share (such as Tutor Perini's 2011 acquisition of Anderson Companies), the prevailing model is to subcontract small and mid-size firms when the necessary. Furthermore, industry revenue is increasingly generated through design-build contracts and consulting and advisory roles, which both reduce the need to operate larger companies with many employees. As such, IBISWorld expects industry concentration to remain low in the five years to 2018.
Despite the recession's doldrums, revenue is expected to jump 6.8% in 2013, though stubbornly high office vacancy rates will likely delay a more dramatic jump until later in the five years to 2018. Overall, though, improvements across the US economy will drive strong industry growth, with demand for new construction returning as businesses expand to meet growing consumer demand. During the five years to 2018, industry revenue is forecast to grow. For more information, visit IBISWorld’s Commercial Building Construction in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes firms 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
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.