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
Oct 8, 2024 - Oversupply Curbs Life Sciences Construction
- 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.
- The Dodge Momentum Index (DMI) decreased by 4.2% in September 2024 to 208.6 (2000=100), down from the revised August reading of 217.7. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. On a monthly basis, the institutional planning component improved by 5.2% in September, but commercial planning declined by 7.8%. Dodge’s associate director of forecasting, Sarah Martin, said, “Despite this month’s decline, the Dodge Momentum Index remains at very robust levels. A surge in data center activity drove much of the recent rapid growth in the DMI – so as planning for that sector moderated over the month, overall commercial planning fell back. By mid-2025, the Fed’s rate cuts should spur planning projects to reach groundbreaking more quickly – leading to stronger nonresidential activity as 2025 progresses.”
- Developers are feeling more optimistic about construction conditions, which may be leading to fewer project abandonments, according to recent data from ConstructionConnect. In September 2024, project abandonments fell 49.8% compared to the same period a year earlier. Abandoned projects have a delayed bid date, have been paused, or have been canceled. Within the private sector, project abandonments fell 9.4% in September 2024 compared to September 2023, projects put on hold dropped 6.8%, and delayed bid activity was flat with a 0.1% decline. Public projects saw a 17.6% year-over-year drop in projects put on hold in September, and abandonments fell 5.5%. Developers are likely feeling more optimistic after the Federal Reserve cut interest rates by 0.5 percentage points on September 18.
- Investments in data centers are expected to remain strong, but construction firms serving the industry still face lingering headwinds, according to a recent report by CBRE. While data center pre-leasing rates in most regions exceed 80% - suggesting demand is in step with increasing supply – construction contractors are seeing challenges in power distribution access and supply chain constraints for key components, including transformers and circuit breakers. Industry observers suggest contractors can better manage supply chain issues and project delays by exploring supply chain alternatives and collaborating more closely with suppliers and other project stakeholders.
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