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

                              Apr 8, 2024 - Steady but Slower Industry Growth
                              • The commercial building contractor industry is expected to experience slower but steady sales growth in the coming years. The industry’s year-over-year sales decreased to -0.9% in 2021, then rose 16.4% in 2022 and 19.6% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to drop to 0.6% in 2024, then rise 4.1% in 2025. The industry will then see flat but steady average annual growth of about 5.6% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
                              • Contractors have cooled on starting new industrial construction projects after a period of red-hot demand during the pandemic, according to Globe St. Nearly 1.2 billion square feet of industrial space was added over the past two years, according to CBRE. The health crisis drove up demand for warehousing and logistics space amid the boom in ecommerce, but high interest rates, weaker demand, and overcapacity have slowed industrial construction starts. According to CBRE, in the fourth quarter of 2023, industrial starts fell to 46.3 million square feet compared to a quarterly average of 102.5 million square feet in 2022. However, CBRE believes industrial starts will bounce back once the fresh round of new supply is absorbed and additional space is needed as demand increases.
                              • The boom in artificial intelligence (AI) - and the data centers needed to power it - are expected to drive a significant increase in electricity demand, according to The Wall Street Journal. Power industry experts suggest renewables won’t be able to come online fast enough to support the appetite for electricity created by the coming wave of data centers to support AI. That is likely going to require leaning more on fossil fuels, namely natural gas, which complicates tech and utility firm industry commitments to reducing their emissions. Electricity demand has grown slowly for years, but consulting firm Grid Strategies recently doubled its five-year electricity demand outlook from what it was projecting just last year. Hunger for electricity to power data centers is global. The International Energy Agency estimates worldwide electricity consumption from AI, data centers, and cryptocurrency could double by 2026.
                              • 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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