Electrical 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 77,500 electrical contractor firms in the US provide electrical installation, repair, and maintenance work. They handle wiring, lighting, networking, fire and safety equipment, and energy management systems, among other tasks. Much of the work is installation and repair of residential electrical wiring. Contractors must buy materials and then install them according to code in homes and other buildings.

Demand Dependent on Construction Activity

Contractors can market new services such as design work during periods of low demand, but new construction ultimately drives the industry.

Liability for Damages

Oftentimes builders or general contractors will try to cut corners, directing ECs to take shortcuts that violate code.

Industry size & Structure

An average electrical contractor has 14 employees and does $2.2 million in annual revenue.

    • Overall, the electrical contractor industry has $173 billion in annual revenue and 1.1 million employees.
    • Segments include power installation, telecommunications setup, fire and safety systems.
    • 88% of establishments have fewer than 20 employees.
    • About 41% of establishments do less than $500,000 a year in business.
    • Large firms include Emcor Group (CT), Integrated Electrical Services (TX), and Rosendin Electric (CA).
                                Industry Forecast
                                Electrical Contractors Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Jun 14, 2024 - Wage Growth Outpaces Pricing
                                • Wages in the electrical contracting industry rose moderately year-over-year in April 2024, according to the Bureau of Labor Statistics (BLS). Meanwhile, BLS data show that producer prices for nonresidential electrical contractors in April were down slightly. Electrical contractor margins could be squeezed as wage growth rises and producer prices contract. In April, employment in the electrical contracting industry rose modestly compared to a year earlier, according to the BLS.
                                • High interest rates have slowed the US housing market, a key demand driver for electrical contracting. In May 2024, the average 30-year fixed-rate mortgage rose seven basis points to 7.06% compared to 6.99% in April, according to Freddie Mac. May’s rate was up 64 basis points from May 2023, when the average 30-year fixed-rate mortgage was 6.34%. The National Association of Home Builders (NAHB) expects 30-year mortgage rates to linger in the 6.66% range through the end of the year and dip slightly below 6% by the end of 2025. The NAHB projects that the Federal Reserve will announce a rate cut at its meeting in December, and there will be another six cuts in 2025.
                                • The Dodge Momentum Index (DMI) increased 2.7% in May 2024 to 179.0 (2000=100), up from the revised April reading of 174.3. 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 improved by 5.5%, but institutional declined by 3.4%. Dodge’s associate director of forecasting, Sarah Martin, said, “Owners and developers are gaining confidence in 2025 market conditions, alongside more stable and predictable interest rates – spurring stronger commercial activity over the month. Conversely, after last year’s growth, institutional planning is decelerating, as high material costs, labor shortages, and elevated interest rates seep into planning decisions. The overall DMI remains 40% higher than May 2019 levels, indicating a steady pipeline of construction projects that will be ready to break ground through mid-2025.”
                                • Booming demand for artificial intelligence (AI) has unleashed a race to build enough data centers to support the nascent technology, according to The Wall Street Journal. However, building and outfitting the giant warehouses that shelter AI supercomputers is being slowed by land, power, and components shortages. Developers have been challenged to find available tracts of cheap property near enough to large amounts of electricity supply. The lead times for some key data center components, including cooling systems and backup generators, have grown up to five times longer than just a few years ago. According to real estate firm CBRE, US data center space increased by 26% in 2023. However, prices for available data center space are rising while vacancy rates are essentially nil, suggesting demand is far outstripping supply. Data center services firm Equinix notes it is challenging for the industry to scale up quickly due to extensive project planning and supply chain management complexities.
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