The Metal Construction Association (MCA) recently released a report identifying 11 factors driving the nonresidential construction industry, based on data analysis, surveys, and interviews with industry leaders.
These trends are expected to play a role in shaping the nonresidential construction sector in the coming years:
Talent shortages and management succession challenges
At the height of the recession, 30 percent of the commercial construction industry lost their jobs, which caused a lack of skilled workers as business started to pick back up. The need to recruit and keep employees is key to attracting the next generation to construction.
Greater use of technologies
Construction is becoming more standardized and computerized with prefabrication and modularization use of robotics and 3D printing. The building information model (BIM) process is also playing a much larger role nowadays.
Productivity improvements needed for profitability
While use of BIM, prefabrication, modularization, and green construction are necessary in construction manufacturing, the keys to being profitable at the contractor level are technology and planning.
Changes in construction delivery systems
A slow shift is being seen from the traditional design-bid-build (or ‘hard-bid’) approach to more collaborative or alternative delivery methods that were gaining popularity before the recession.
As the baby boomer generation is getting to the retirement age, the industry is facing a change in ownership among approximately half of all construction firms.
International debt problems
Although the United States has enjoyed a resurgent economy, European countries like Greece, Italy, Spain, and Portugal are struggling. Even China is experiencing an economic slowdown, which threatens the savings and investments made in a more confident atmosphere in the last few years.
Forming partnerships with customers
A more customer-centric orientation is returning. Manufacturers and suppliers must match their marketing and delivery methods to the needs of the contractor and become partners in the process.
In order to survive the recession, companies had to get to positive or neutral cash flow in the new demand reality of the 2009 to 2011 period. This focus on efficiency created lower-cost structures.
Growth through acquisition
The demand for attractive building products that companies purchase is high. Industry stakeholders are looking to realize overhead efficiencies and maximize non-traditional margin enhancements, such as risk management and technology. Those companies realizing profitability in this way are well-positioned to prosper as the construction market improves.
On the manufacturing distribution side of things, there was a lot of large company consolidation last year. Market conditions led to unprecedented merger activity among large players. Today, a seller can receive what the company deems a fair price, while a buyer feels there is still enough business ahead to make a decent return on the investment.
Mergers and acquisitions activity benefit buyers and sellers
Pace and scale of activity are both up with strategic and financial buyers. With demand high and the supply of attractive companies low, prices have increased as expected.