Through September, spending on nonresidential construction was up 9.2%, to $883.9 billion, according to preliminary estimates by the Commerce Department’s Bureau of the Census. Sectors hard-hit by the coronavirus pandemic—including lodging, retail/commercial, and even office—were showing signs of life.
So it makes sense that a recent polling of 212 architects, engineers, contractors, and developer/owners found nearly three-fifths of respondents—59.4%—rating 2022 an “excellent” or “good” business year. Only 15.6% rated the year “mediocre” or “poor.”
The vast majority of firms, 77.7%, rated their overall health “very good” or “good.” Conversely, only 4.7% saw their firms’ financial condition as either “weak” or “very weak.” Among the firms polled, 55% confirmed their revenue had increased, and another 20.9% said their revenue was level with last year’s. Gains were achieved despite nearly three-quarters of the firms surveyed characterizing the construction/materials market hobbled by supply-chain snags as “intensely” or “very” competitive.
Euphoria, though, might be short-lived, and firms are tempering their prognoses about the future. Nearly one-quarter—23.4%—expect their revenue to be down in 2023, and another 34.4% predict a flat year. Competition ranked third, behind general economic conditions and inflation, as the most important concern AEC firms believe they will face next year. Nearly two-thirds—64%—anticipate that materials prices will continue to rise in 2023. An even higher number, 71.2%, said they were girding for increases in bid prices for projects.
Our poll also found at least one-fifth of firms are concerned about the availability of capital funding for projects, regulations, cashflow management, and keeping their staffs motivated.
When asked about what business development strategies they planned to deploy next year, more than half—53.4%—said they would hire selectively to burnish their firms’ competitiveness, and 47.1% were planning to step up their staff training and education to enhance competitiveness.
Other business strategies these firms are plotting include increasing their marketing and public relations (25.3% of firms polled currently don’t use social media, and among that do LinkedIn is their preferred platform), investing more in technology, and creating new service or business opportunity.
U.S. design and construction firms pick their battles, sector by sector
Our survey asked AEC firms to assess their prospects in 18 construction sectors. Sizable percentages (at least 30%) were hopeful about business for airports, data centers, government/military buildings, healthcare, industrial/warehouse, multifamily and senior living residential, science + technology, and university. At least 20% of respondents saw their prospects as “average” for performing arts centers, hospitality, K-12 education, and sports and recreations. AEC firms placed offices and interior fitouts, religious, and retail/commercial in the “weak” or “very weak” categories.
Here's a closer look at their responses. Keep in mind that these firms aren’t active in every sector, so the numbers providing ratings were smaller than the total in each category. It’s also worth noting that nearly one-third of the AEC firms polled generate between 25% and 74% of their annual business from reconstruction projects:
• Healthcare appears to hold out the greatest opportunities for next year. More than 45% of respondents rated their prospects in this sector as excellent or good. Multifamily received those ratings from 43.1% or AEC firms polled, industrial/warehouse from 39.7%, and data centers from 37.8%.
• Through September, construction spending in the office sector was up only 0.7%, according to Census Bureau estimates. The AEC firms that responded to our survey aren’t anticipating a rebound in this sector any time soon: 41.3% rated their prospects weak or very week. Another 23.5% gave the same ratings to office interiors and fitouts.
Even though Census estimates that the commercial sector (which encompasses retail) was up 22.4% through September, our survey’s respondents are still taking a wait-and-see approach, as 33.3% saw their prospects in retail next year as weak or very weak.
• 29% of respondents said their firms don’t build in the retail sector. And even with the uptick in firms that have expanded their practices and services, only around 10% of our survey’s respondents see mergers or acquisitions in their immediate futures. Our survey reveals an industry whose firms, in many cases, focus on a limited array of typologies and clients, and leave other sectors to specialists.
It was not surprising that 53.2% of respondent firms aren’t building airports and 41.2% aren’t active in the religious sector. Only about half of respondent firms—46.2%—engage performing arts center projects, and 44.3% keep their distances from data centers. But even some of the broader sectors, notably education, find between 30% and 33% of respondent firms absent. Nearly two-fifths aren’t active in science + technology construction, either, and more than two-fifths don’t build in the multifamily sector.
Related Stories
Market Data | Dec 14, 2017
ABC chief economist predicts stable 2018 construction economy
There are risks to the 2018 outlook as a number of potential cost increases could come into play.
Market Data | Dec 11, 2017
Global hotel construction pipeline is growing
The Total Pipeline stands at 12,427 Projects/2,084,940 Rooms.
Market Data | Dec 11, 2017
Construction backlog surges, sets record in third quarter
CBI is a leading economic indicator that reflects the amount of construction work under contract, but not yet completed.
Market Data | Dec 7, 2017
Buoyed by healthy economy, ABC Index finds contractors upbeat
Despite rising construction labor and materials costs, 55% of contractors expect their profit margins to expand in the first half of 2018.
Industry Research | Nov 28, 2017
2018 outlook: Economists point to slowdown, AEC professionals say ‘no way’
Multifamily housing and senior living developments head the list of the hottest sectors heading into 2018, according a survey of 356 AEC professionals.
Architects | Nov 28, 2017
Adding value through integrated technology requires a human touch
To help strike that delicate balance between the human and the high-tech, we must first have an in-depth understanding of our client’s needs as well as a manufacturer’s capabilities.
Market Data | Nov 27, 2017
Construction's contribution to U.S. economy highest in seven years
Thirty-seven states benefited from the rise in construction activity in their state, while 13 states experienced a reduction in activity.
Market Data | Nov 15, 2017
Architecture Billings bounce back
Business conditions remain uneven across regions.
Market Data | Nov 14, 2017
U.S. construction starts had three consecutive quarters of positive growth in 2017
ConstructConnect’s quarterly report shows the most significant annual growth in the civil engineering and residential sectors.
Market Data | Nov 3, 2017
New construction starts in 2018 to increase 3% to $765 billion: Dodge report
Dodge Outlook Report predicts deceleration but still growth, reflecting a mixed pattern by project type.