Construction Industry Opportunities
February 6, 2012
Industry Intelligence from First Research, a division of Hoover's (a D&B company)
Buildings for High-Growth Population Segments - Growth in certain population segments will present opportunities for the commercial construction industry. The US Census estimates that the number of people over age 65 will grow about 40 percent from 2010 to 2020, creating the need for retirement, assisted living, and hospital facilities. The need for schools will increase as the population of children ages 5 through 19 rises an estimated 7 percent during the same decade.
Generally Resilient Market Segments - Nonresidential construction spending can be positive, even when residential construction spending is negative. For example, during the recent real estate and mortgage crisis, private residential construction spending fell 12 percent between 2008 and 2009, while highway construction spending rose steadily over the same time period. Other projects like lodging, power plants, and public safety can also do well when other construction spending declines.
Government Projects - The nation's roads, bridges, tunnels, ports, levies, and other infrastructure need periodic maintenance, upgrades, and expansion. The US government is the single largest purchaser of outsourced services, such as engineering and construction services for infrastructure work. Long term government contracts can present attractive opportunities for contractors.
Green Construction - Demand is growing for environmentally friendly (green) building and
construction materials, practices, and certification. Increased use of steel helps qualify a structure as green, due to recycled content; for example, light gauge steel framing contains at least 25 percent recycled steel. Compared to wood, steel products last longer and have more uniform quality, reducing job site waste. New "cool" metal roofing is more energy-efficient than traditional materials. The US Green Building Council and the Green Building Initiative certify green buildings.
Computer, Construction Technology - Computer technology and new building techniques enable companies to improve project implementation. Computer technology has reduced costs and mistakes in an industry that relies heavily on correct scheduling, coordination, and technical specifications. Newer building methods, such as tilt-up construction and greater use of pre-fabricated structural parts, simplify commercial projects and reduce time-to-completion and costs.
Remodeling Market - The remodeling market grew rapidly in the 1990s to early 2000s, but experienced weakness during the late 2000s. The Remodeling Market Index, a measure of market confidence by remodelers, started falling in 2005, began a recovery in 2009, and slumped again in 2011, in line with the rest of the construction sector. The segment is almost entirely in the hands of small builders. Although individual projects are smaller, volume is much steadier than new home construction, and much less financially risky.
Internet Marketing - The Internet can dramatically improve traffic to builder sales centers, increase conversion rates, and improve customer satisfaction by enabling builders to stay connected with customers through the entire home ownership cycle. With Internet technology, potential buyers can visit a number of different developments, view the types of models available, and take virtual tours through model homes. The sites also enable buyers to apply for mortgages and insurance.
Special-Purpose Housing Developments - The changing demographics of the US population suggest that demand for second homes and retirement communities will increase. The large baby boom generation is now in its peak years of earning power and asset accumulation. Affluent families have the means to buy second homes for vacations, and these same families will be in the age range for retirement during the next decade.
Options, Upgrades - Consumers are demanding more options and upgrades in new homes, a trend that increases the bottom line for builders. Toll Brothers said that in 2010, upgrades to its detached homes added an average of 25 percent to the price of the home, and 10 percent to the average price of an attached home.