US Construction Sector

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 916,387 construction sector establishments are involved in the clearing and preparation of land; building of structures and infrastructure; installation of mechanical systems, nonstructural components and finishings; and the remodeling and expansion of existing structures. The sector is segmented into construction of buildings (residential and nonresidential), heavy and civil engineering, and specialty trades.

Dependence on the Economy and Market

Demand for construction is highly dependent on economic health and can vary considerably across markets.

Seasonal and Weather-Related Factors

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

Industry size & Structure

The construction sector is comprised of 916,387 establishments that employ 7.7 million workers and generate $2 trillion in annual revenue, according to government sources.

    • The construction sector represents 4% of the nation's Gross Domestic Product (GDP) and employs 5% of the country's workers.
    • The specialty trade contracting segment is highly fragmented: the 50 largest specialty trade firms represent 7% of segment revenue. The 50 largest building construction firms represent 20% of segment revenue; the 50 largest heavy and civil works firms represent 26% of segment revenue.
    • The construction sector has a high volume of independent contractors with no employees. The number of nonemployer establishments is about 837,826 in building construction, 38,909 in heavy and civil works, and 1.8 million in specialty contracting. The owner of nonemployer establishments typically performs the work or subcontracts labor for large or complex jobs.
    • The construction sector shed 78,000 establishments in 2021, which equals about 8.5% of existing establishments, according to the Bureau of Labor Statistics. However, the industry added 98,000 new establishments, which is equivalent to 10.7% of existing establishments. As a result, the construction sector has an average growth rate of 2.2%.
    • The construction sector is forecast to grow its employment base by 2.8% overall in 2021-2031, which is lower than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
                                    Industry Forecast
                                    US Construction Sector Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    May 9, 2024 - Construction Poised for Stronger Growth
                                    • The US construction sector is expected to post steadier growth after weakness in some subsectors, primarily residential, led to sluggishness in 2023 and 2024. The industry’s year-over-year sales are expected to rise by 1.2% in 2024 after increasing 2.4% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Annual sales growth is expected to increase by 6.4% in 2025, 6.9% in 2026, 6.2% in 2027, and 5.9% in 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
                                    • 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.
                                    • The total value of construction put in place decreased by 0.2% in March 2024 compared to the prior month, according to the US Census Bureau. A 0.2% rise in spending for nonresidential projects was not enough to offset the 0.7% drop in residential spending. Within the nonresidential segment, March spending growth was led by a 2.8% increase in conservation and development projects, followed by public safety (1.5%), amusement and recreation (1.1%), highway and street (0.9%), and water supply (0.9%). In commenting on October construction spending, Associated Builders and Contractors (ABC) Chief Economist Anirban Basu said, “Nonresidential construction spending rebounded in March, ending a streak of two straight monthly declines. The increase was entirely due to increased public construction spending; private sector nonresidential spending dipped slightly lower in March.” Basu added, “Ongoing spending strength, driven by both the public sector and the ascendant manufacturing category, continues to support healthy backlog for contractors, according to ABC’s Construction Backlog Indicator.”
                                    • On May 2, the average fixed-rate for a 30-year mortgage rose to 7.22%, marking the fifth consecutive week that rates have crept higher, according to Freddie Mac. The spate of weekly interest rate increases came amid the spring home-buying season. Freddie Mac says one-third of annual home sales occur between March and June. Freddie Mac also noted that some buyers may have adjusted to the higher-rate environment, as recently released data suggest that pending home sales were at their highest level in a year. However, the National Association of Homebuilders (NAHB) estimates that if the average fixed-rate for a 30-year mortgage had remained at levels last seen in February 2023 (under 6.25%), an additional 4.5 million US households would be able to afford a median-priced new home.
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