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 41,100 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 17 workers and generates $11 million annually.

    • The commercial building contracting industry consists of 41,100 companies that employ 829,900 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
                              Source: Vertical IQ and Inforum

                              Recent Developments

                              Mar 8, 2024 - Wage Growth Outpaces Prices
                              • Producer prices charged by commercial building contractors increased slightly in Q4 2023 compared to Q4 2022. Meanwhile, wage growth in the industry has been significantly stronger than pricing growth. Weaker pricing power amid steadier wage growth may suggest commercial building contractors’ margins are under pressure from rising wages. In Q4 2023, industry employment increased moderately compared to a year earlier.
                              • The industrial real estate sector is expected to improve in 2024 after high interest rates and inflation reduced demand in 2023, according to a recent outlook by real estate firm JLL. The rise in demand for industrial space is expected to drive redevelopment of existing facilities as older industrial buildings are replaced with more efficient ones. Greater awareness of environmental, social, and governance (ESG) goals and the global shift to renewable energy are also spurring demand for more modern industrial spaces.
                              • The Dodge Momentum Index (DMI) decreased 1.4% in February 2024 to 180.5 (2000=100), down from the revised January reading of 180.5. 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 dropped by 2.3%, and institutional rose by 0.1%. Dodge’s associate director of forecasting, Sarah Martin, said, “Weaker office and healthcare planning constrained nonresidential planning in February. However, the Index remains 25% higher than where it was just two years ago. Most other categories showed growth over the month and Dodge remains optimistic that nonresidential planning will stay elevated throughout 2024 alongside rising confidence in 2025 market conditions.”
                              • Total nonresidential building construction spending is projected to rise 8% in 2024 over 2023, according to FMI’s first-quarter 2024 North American Engineering and Construction Outlook. At growth of 18%, manufacturing will lead 2024 nonresidential building construction, followed by lodging (+12%), educational (+10%), and healthcare (+8%). Some other segments of the nonresidential building sector face headwinds, including high interest rates, inflation, and tighter lending standards. These pressures and high vacancy rates will reduce office project spending by 2% in 2024. Commercial project spending is forecast to decline by 4% in 2024.
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