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
Giants 400 | Oct 23, 2023
Top 190 Multifamily Architecture Firms for 2023
Humphreys and Partners, Gensler, Solomon Cordwell Buenz, Niles Bolton Associates, and AO top the ranking of the nation's largest multifamily housing sector architecture and architecture/engineering (AE) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking factors revenue for all multifamily buildings work, including apartments, condominiums, student housing facilities, and senior living facilities.
Senior Living Design | Oct 19, 2023
Senior living construction poised for steady recovery
Senior housing demand, as measured by the change in occupied units, continued to outpace new supply in the third quarter, according to NIC MAP Vision. It was the ninth consecutive quarter of growth with a net absorption gain. On the supply side, construction starts continued to be limited compared with pre-pandemic levels.
Warehouses | Oct 19, 2023
JLL report outlines 'tremendous potential' for multi-story warehouses
A new category of buildings, multi-story warehouses, is beginning to take hold in the U.S. and their potential is strong. A handful of such facilities, also called “urban logistics buildings” have been built over the past five years, notes a new report by JLL.
Contractors | Oct 19, 2023
Crane Index indicates slowing private-sector construction
Private-sector construction in major North American cities is slowing, according to the latest RLB Crane Index. The number of tower cranes in use declined 10% since the first quarter of 2023. The index, compiled by consulting firm Rider Levett Bucknall (RLB), found that only two of 14 cities—Boston and Toronto—saw increased crane counts.
Office Buildings | Oct 19, 2023
Proportion of workforce based at home drops to lowest level since pandemic began
The proportion of the U.S. workforce working remotely has dropped considerably since the start of the Covid 19 pandemic, but office vacancy rates continue to rise. Fewer than 26% of households have someone who worked remotely at least one day a week, down sharply from 39% in early 2021, according to the latest Census Bureau Household Pulse Surveys.
Contractors | Oct 19, 2023
Poor productivity cost U.S contractors as much as $40 billion last year
U.S. contractors lost between $30 billion and $40 billion in 2022 due to poor labor productivity, according to a new report from FMI Corp. The survey focused on self-performing contractors, those typically engaged as a trade partner to a general contractor.
Urban Planning | Oct 12, 2023
Top 10 'future-ready' cities
With rising climate dilemmas, breakthroughs in technology, and aging infrastructure, the needs of our cities cannot be solved with a single silver bullet. This Point2 report compared the country's top cities over a variety of metrics.
Higher Education | Oct 10, 2023
Tracking the carbon footprint of higher education campuses in the era of online learning
With more effective use of their facilities, streamlining of administration, and thoughtful adoption of high-quality online learning, colleges and universities can raise enrollment by at least 30%, reducing their carbon footprint per student by 11% and lowering their cost per student by 15% with the same level of instruction and better student support.
Architects | Oct 4, 2023
Architects and contractors underestimate cyberattack risk
Design and construction industry firms underestimate their vulnerability to cyberattacks, according to a new report, Data Resilience in Design and Construction: How Digital Discipline Builds Stronger Firms by Dodge Construction Network and content security and management company Egnyte.
Building Materials | Oct 2, 2023
Purdue engineers develop intelligent architected materials
Purdue University civil engineers have developed innovative materials that can dissipate energy caused by various physical stresses without sustaining permanent damage.