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
Sep 6, 2024 - Architectural Billings Remain Weak
- Demand for building design services improved in July over the prior month, but architectural billings remain soft, according to an August report by the American Institute of Architects (AIA). The AIA’s Architecture Billing Index (ABI) rose to 48.2 in July from June’s reading of 46.4. Any reading of 50 or more indicates growth in architectural billings. The score for new project inquiries rose to 52.4 in July compared to 51.6 in June, and the index for the value of new design contracts increased to 46.5 from 45.6. The AIA’s Chief Economist, Kermit Baker said, "Architecture firms continue to face a billings slowdown. However, the emerging prospects of lower interest rates coupled with a modest uptick in project inquiries suggest that some dormant projects may be revived in the coming months.”
- The total value of nonresidential building construction starts increased 25% in July from June, according to Dodge Construction Network. The gain was led by a 33% increase in manufacturing projects, while commercial construction starts advanced 30% on stronger lodging and data center spending. Institutional starts grew by 18% in July over June, fueled by a robust uptick in healthcare projects. Dodge Construction Network chief economist Richard Branch said, “Construction starts showed great promise in July. However, the short-term remains questionable due to high interest rates. The Federal Reserve is likely to cut interest rates in September, which will, over time, make market conditions more conducive to moving projects forward. In the meantime, construction starts will likely remain volatile over the next few months.”
- Commercial construction spending is expected to decline 7% in 2024 amid weaker demand for warehousing space, high interest rates, and tighter lending standards, according to FMI’s third-quarter 2024 North American Engineering and Construction Outlook. Commercial spending is projected to drop another 6% in 2025 and 2% in 2026 before rising 4% in 2027 and 8% in 2028. Lodging construction spending is forecast to drop 6% in 2024 as inflation weighs on the budget end of the market. Spending on lodging projects will decline 9% in 2025 and 3% in 2026 before rising 6% in 2027 and 12% in 2028. Stubbornly high office vacancies will continue to hinder new office construction, which is projected to see flat spending in 2024, then drop 1% in 2025, remain flat in 2026 before growing 4% in 2027 and 5% in 2028.
- 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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