Commercial Building Contractors
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 40,500 commercial building contractors in the US coordinate resources and manage the building process for industrial, commercial, and institutional projects. About 71% of contractors are sole proprietors or entities without workers on payroll. Most commercial building contractors rely heavily on subcontractors.
Dependence on Subcontractors
Commercial building contractors are dependent on subcontractors for specialized activities, such as electrical, plumbing, or mechanical work.
Competitive Pricing Environment
Most commercial construction jobs are competitive bidding situations, and price is a major deciding factor in which commercial contractor obtains the job.
Industry size & Structure
A typical commercial building contractor employs about 21 workers and generates $11.6 million annually.
- The commercial building contracting industry consists of 40,500 companies that employ 884,000 workers and generate $471 billion annually.
- About 70% of contractors are sole proprietors or entities without workers on payroll.
- Most commercial building contractors rely heavily on subcontractors.
- Large companies include Turner Corporation, Tutor Perini, Jacobs Engineering, and Gilbane Building Company.
Industry Forecast
Commercial Building Contractors Industry Growth
Recent Developments
Nov 8, 2024 - Architecture Billings Remain Weak
- Demand for building design services remained soft in September, according to an October report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) was flat at 45.7 in September. Any reading of 50 or more indicates growth in architectural billings. September was the twentieth consecutive month to see a downward trend in billings. The score for new project inquiries dropped to 51.6 in September compared to 52.4 in August, but the index for new design contracts increased from 47.3 to 48.3. The AIA’s Chief Economist, Kermit Baker said, “Despite recent rate cuts by the Federal Reserve, many clients remain on the sidelines with regard to proceeding on planned projects. And while new project opportunities also emerge, clients are cautious about which to pursue. Fortunately, architecture firms report backlogs of 6.4 months on average, which remain above pre-pandemic levels and are an indication that there is existing work in the pipeline.”
- The Dodge Momentum Index (DMNorth American construction and engineering spending in 2024 is expected to grow by about 5%, according to FMI’s fourth-quarter 2024 North American Engineering and Construction Outlook. With growth of 29%, public safety will lead 2024 nonresidential building construction, followed by manufacturing (21%), amusement and recreation (10%), transportation (5%), educational (4%), and religious (2%). Commercial construction spending is expected to decline 8% in 2024 amid weaker demand for warehousing space. Lodging construction spending is forecast to drop 6%, and stubbornly high office vacancies will continue to weigh on new office construction, which is projected to see spending rise by 1% in 2024. Despite favorable demographic trends, project delays for some private hospital developments will cap healthcare construction spending growth at 1% in 2024.
- The total value of US construction put in place rose 0.1% in September 2023 compared to the prior month, according to the US Census Bureau. Residential spending grew 0.2%, and nonresidential spending increased 0.1%. In the nonresidential buildings segment, growth was led by transportation, which saw growth of 0.8%. Lodging and educational spending each rose 0.3% while spending on commercial projects increased 0.2%. Public safety, office, and amusement and recreation each saw spending decline 0.1% in September, and healthcare spending was off 0.6%. Communication spending fell 0.3% in September.
- According to a recent trend report by CBRE, developers are pulling back on new life sciences projects amid a glut of new supply coming online. Demand for life sciences lab and research space boomed during the pandemic, but speculative project demand has since slowed. About 72% of life sciences space currently under construction remains unleased. New life sciences space under construction peaked in the second quarter of 2023 at about 40 million square feet but fell to 21.2 million square feet in Q2 2024. A separate report by Gartner suggests development of life sciences space is also pressured by rising costs, which are up about 20% to 25% compared to pre-pandemic levels. Lead times for specialty lab equipment have also increased by about 10 to 20 weeks over the same period.
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