Site Prep 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 38,400 site preparation contractors in the US prepare land for construction activity. Services include excavation work; wrecking and demolition; trenching; sewer and water main installation; construction machinery rental (with operator); and road construction. While private sector projects account for the majority of revenue, site prep contractors also provide services to federal, state, and local governments.

Dependence On General Contractors

Because site preparation is just part of the construction process, companies often depend on general contractors to secure client business.

Seasonal And Weather-Related Factors

Seasonality and weather conditions affect project timelines and site prep contractors’ ability to perform work.

Industry size & Structure

The average site preparation contractor operates out of a single location, employs 9-10 workers, and generates about $2-3 million annually.

    • The site preparation services industry consists of about 38,400 companies that employ 396,000 workers and generate about $97 billion annually.
    • The industry is fragmented; most site preparation contractors serve a limited geographical market.
    • Some large general contractors, such as Granite Construction and Sterling Construction, offer site preparation services in addition to other construction services.
                            Industry Forecast
                            Site Prep Contractors Industry Growth
                            Source: Vertical IQ and Inforum

                            Recent Developments

                            Jun 18, 2024 - Multifamily Development Slows
                            • Some multifamily developers are pulling back on project plans amid high interest rates, tighter lending standards, and increased construction costs, according to The Wall Street Journal. In April, multifamily starts dropped to 322,000, marking the weakest April for starts since 2020, according to Yardi Matrix. In 2023, about half a million new apartment units came online, and some industry observers expect a similar influx of apartment supplies in 2024. The surge in new apartment supply may mean having to reduce rent to fill them, which gives developers of new projects pause. Some regional banks have less money to lend as their existing portfolios of commercial real estate loans are marked down.
                            • High interest rates have slowed the US housing market, a key demand driver for site prep contractors. 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.”
                            • Amid a shortage of existing homes on the market, 61% of home buyers prefer new homes, according to a recent survey by the National Association of Home Builders (NAHB). The survey’s results show the highest share of new-home preference since 2007 when 63% of home buyers preferred new construction. Homeowners who locked in a low interest rate before 2022, when the Federal Reserve began raising interest rates, are reluctant to sell and swap their low-interest loans for a higher rate. New single-family homes have filled the void in the market left by a lack of existing homes for sale.
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