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
Laboratories | Nov 8, 2023
Boston’s FORUM building to support cutting-edge life sciences research and development
Global real estate companies Lendlease and Ivanhoé Cambridge recently announced the topping-out of FORUM, a nine-story, 350,000-sf life science building in Boston. Located in Boston Landing, a 15-acre mixed-use community, the $545 million project will achieve operational net zero carbon upon completion in 2024.
Retail Centers | Nov 7, 2023
Omnichannel experiences, mixed-use development among top retail design trends for 2023-2024
Retailer survival continues to hinge on retail design trends like blending online and in-person shopping and mixing retail with other building types, such as offices and residential.
Giants 400 | Nov 6, 2023
Top 65 Cultural Facility Construction Firms for 2023
Turner Construction, Clark Group, Whiting-Turner, Gilbane, and Holder Construction top BD+C's ranking of the nation's largest cultural facilities sector general contractors and construction management (CM) firms for 2023, as reported in the 2023 Giants 400 Report. Note: This ranking includes revenue from all cultural building sectors, including concert venues, art galleries, museums, performing arts centers, and public libraries.
Giants 400 | Nov 6, 2023
Top 100 Government Building Construction Firms for 2023
Hensel Phelps, Turner Construction, Clark Group, Fluor, and BL Harbert top BD+C's rankings of the nation's largest government building sector general contractors and construction management (CM) firms for 2023, as reported in the 2023 Giants 400 Report. Note: This ranking includes revenue from all government building sectors, including federal, state, local, military, and Veterans Affairs (VA) buildings.
Healthcare Facilities | Nov 3, 2023
The University of Chicago Medicine is building its city’s first freestanding cancer center with inpatient and outpatient services
The University of Chicago Medicine (UChicago Medicine) is building Chicago’s first freestanding cancer center with inpatient and outpatient services. Aiming to bridge longstanding health disparities on Chicago’s South Side, the $815 million project will consolidate care and about 200 team members currently spread across at least five buildings. The new facility, which broke ground in September, is expected to open to patients in spring 2027.
Office Buildings | Nov 2, 2023
Amazon’s second headquarters completes its first buildings: a pair of 22-story towers
Amazon has completed construction of the first two buildings of its second headquarters, located in Arlington, Va. The all-electric structures, featuring low carbon concrete and mass timber, help further the company’s commitment to achieving net zero carbon emissions by 2040 and 100% renewable energy consumption by 2030. Designed by ZGF Architects, the two 22-story buildings are on track to become the largest LEED v4 Platinum buildings in the U.S.
Sustainability | Nov 1, 2023
Researchers create building air leakage detection system using a camera in real time
Researchers at the U.S. Department of Energy’s Oak Ridge National Laboratory have developed a system that uses a camera to detect air leakage from buildings in real time.
Adaptive Reuse | Nov 1, 2023
Biden Administration reveals plan to spur more office-to-residential conversions
The Biden Administration recently announced plans to encourage more office buildings to be converted to residential use. The plan includes using federal money to lend to developers for conversion projects and selling government property that is suitable for conversions.
Sustainability | Nov 1, 2023
Tool identifies financial incentives for decarbonizing heavy industry, transportation projects
Rocky Mountain Institute (RMI) has released a tool to identify financial incentives to help developers, industrial companies, and investors find financial incentives for heavy industry and transport projects.
Contractors | Nov 1, 2023
Nonresidential construction spending increases for the 16th straight month, in September 2023
National nonresidential construction spending increased 0.3% in September, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.1 trillion.