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 130,600 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 22-23 workers and generates $13 million annually.

    • The commercial building contracting industry consists of 130,600 companies that employ 806,900 workers and generate $471 billion annually.
    • About 71% 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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Mar 10, 2023 - Architectural Billings Rise, Still Soft
                              • Demand for building design services remained soft in January, according to a February report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) was 49.3 in January, up from December’s reading of 48.4. Any reading above 50 indicates growth in architectural billings. In January, the score for new project inquiries rose to 55.2 from 52.6 in December. The design contracts score rose to 53.4 from 50.0. The AIA’s Chief Economist, Kermit Baker said, “While the downturn in design activity extended to four months in January, there are signs of easing. In particular, architecture firms reported that new project work has begun to increase, signifying that this decline in billings may reverse in the coming months.” By major sector, billings index growth in January was mostly in contraction territory: mixed practice was 56.0, institutional was 48.6, commercial/industrial was 46.8, and multi-family residential was 45.9.
                              • The Dodge Momentum Index (DMI) increased 1.9% in February 2023 to 203.0 (2000=100), up from the revised January reading of 199.3. 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 commercial planning component rose by 1.4%, and institutional increased by 2.9%. Commercial planning got a boost from an almost 20% rise in office planning, and stronger data center project planning. In the institutional sector, education and healthcare planning saw gains, with research laboratories being a noted bright spot. Dodge’s associate director of forecasting said, “The continued elevation in the DMI should provide hope that construction activity will grow in 2024. Owners and developers tend to put projects into planning until well after economic conditions weaken. During the Great Recession, for example, the DMI did not substantially decline until 2009. Therefore, the anticipated mild economic growth in 2023 could cause the DMI to moderate over the year, but it is unlikely to fall below historical norms.”
                              • The total value of nonresidential construction put in place declined 0.1% in January 2023 compared to the prior month, according to the US Census Bureau. While overall spending declined, manufacturing projects were a bright spot, and manufacturing construction spending in January was up 5.9% over December. Power projects saw 0.9% growth, office spending increased 0.7%, and healthcare was up 0.2%. Spending on commercial projects fell by 3.1%. Construction spending for manufacturing projects in January 2023 was up 53.6% year over year. Associated Builders and Contractors (ABC) chief economist Anirban Basu said, “With the CHIPS and Science Act directing $280 billion into semiconductor manufacturing and an ongoing desire to reshore manufacturing capacity, the segment should continue to thrive.”
                              • A robust labor market and wage growth combined with steady investments in equipment, IT, and factory construction could help the US economy avoid a recession in 2023, according to Associated General Contractors of America (AGC) chief economist Ken Simonson. Manufacturing and infrastructure investments stemming from the Infrastructure Investment and Jobs Act and the Chips and Science Act are expected to be key pockets of growth for the construction sector. In the manufacturing sector, projects are being driven by EV battery plant and carbon capture projects. However, Simonson noted that high materials, labor, and financing costs could cause a slowdown for other types of commercial construction categories, including warehouse, retail, office, lodging, and multifamily.
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