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

                              Nov 10, 2022 - Nonresidential Building Construction Outlook Improves
                              • The Dodge Momentum Index (DMI) increased 9.6% in October 2022 to 199.7 (2000=100), up from the revised September reading of 182.2. The DMI 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 increased by 13%, and institutional rose by 2.9%. An increase in office and lodging projects boosted the commercial planning pipeline. The institutional sector was mixed amid a growing pipeline of recreation and education projects, but the number of healthcare and public planning projects declined. Developers and project owners continue to see healthy demand, despite recession concerns, although continued inflation, high interest rates and materials costs, and labor shortages have the potential to blunt the flow of new projects.
                              • Some real estate developers are holding off on new office projects as remote work has eroded demand for new office space and rising interest rates make projects more expensive, according to The Wall Street Journal. Office occupancy is only about half of what it was before the pandemic, which has prompted some major real estate firms, including Varnado Realty Trust; Hines, Kilroy Realty Corp.; and Brookfield Asset Management, to tap the breaks on new office development projects. The national office vacancy rate is currently 12.5%, up from 9.6% in 2019, according to commercial real estate data firm CoStar Group. About 37% of the office space currently under development remains available, which is double what it was in 2019, according to CoStar.
                              • Warehouse operators are enjoying strong demand as industrial vacancies keep shrinking, rents keep rising, and new capacity is slow to come online, according to an October report by CommercialEdge. The average national in-place rent for industrial property was up 5.8% in September compared to a year earlier. The national vacancy rate remained at 4.1%. At the end of September, more than 700 million square feet of new industrial space was under construction. Warehouse rent growth is strongest near busy ports. The Phoenix area has seen explosive growth due to spillover from the coastal region of Southern California.
                              • Inflation’s impact on materials deliveries and project budgets in 2023 is top-of-mind for commercial real estate developers, according to a recent report commissioned by real estate development software firm, Northspyre. About 60% of project managers surveyed said they expect inflation will have a “moderate to major” impact on their business. More than two-thirds said they anticipate inflation will cause them to think more strategically about their purchasing decisions, and 52% plan to be more selective when purchasing materials and selecting vendors. However, inflation grew more slowly in October, which may be a source of developer optimism, according to Construction Dive. October’s consumer price index rose 0.4% compared to the prior month and 7.7% from a year earlier, down from 8.2% year-over-year growth in September.
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