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New trends in construction industry could lead to increased business

August 20, 2014


Few industries are as unique as construction. For a number of sectors, it is all about products, services and repeat customers. That isn’t necessarily true for construction, as few clients come back a second time and the segment instead revolves around the people and relationships first. As a member of the construction industry yourself, you fully understand the ups and downs that happen on a yearly basis. You also know the value of an eye on the market, and watching out for new trends and current events can shed some light on effective business strategies and opportunities for growth.

However, you likely have your hands full working with clients and creating new developments. Here at Clark Schaefer Hackett, we’ve devoted a portion of our time to following the construction industry closely, including watching for positive forecasts, trends and news that may impact your business today.

Recently, we noticed several changes in the sector that may be important to you and your company. For your convenience, we’ve compiled several of them right here that you might be interested in:

Positive outlook present for industry
According to FMI, a management consulting and investment banking firm, the outlook for the construction industry has been optimistic for 2014. One of the strongest segments is transportation, as construction here is historically strong. Its 2014 growth has been forecasted at 7 percent.

However, headwinds do exist for the industry. FMI explained that e-commerce could put a wrinkle in construction, as many businesses – those that would typically employ builders for office and retail space – are embracing the digital age and turning to Internet storefronts as opposed to traditional brick and mortar ones.

Even so, construction spending has been strong, according to the U.S. Census Bureau. The figure for this past May reached a seasonally adjusted annual rate of $956.1 billion, 6.6 percent higher than the same time last year.

Construction jobs on the rise
There is more good news out there for construction companies. In addition to an increase in spending – and a positive forecast – there has also been a rise in the number of construction jobs across the country.

According to the U.S. Bureau of Labor Statistics, the industry has gained 6,000 jobs in June, although growth has been spread out across the many segments of construction, such as heavy and civil engineering, residential and nonresidential. Coupled with the jobs gain, the construction sector also experienced a declining unemployment rate for the month, down to 8.2 percent in June compared to 9.8 percent for the same month in 2013.

Office REITs spur construction activity
All of this growth in the construction industry can be attributed to a number of elements, but one specific type of building has recently provided a significant business opportunity for companies.

Office real estate investment trusts, including Boston Properties Inc., Vornado Realty Trust and Kilroy Realty Corp., have all pledged to invest heavily in office buildings across the country, according to Bloomberg. These REITs are expected to generate at least $11 billion in new developments, providing ample openings for construction firms. This trend has emerged as the climate has shifted away from buying and toward building. The latter is now more affordable, encouraging many to turn to this option as a way to maximize their investments.

“They’re selling assets and they’re developing,” Michael Knott, a managing director at California-based Green Street, told Bloomberg in a telephone interview. “They’re going out the risk-reward spectrum by starting more developments rather than buying.”

These new trends in the industry could lead to increased business for construction firms. Your business faces a tough environment, and any opportunity is good news. However, problems can arise if you don’t make the right financial steps along the way. With Clark Schaefer Hackett, you’ll have experts by your side to provide crucial assistance. Our consulting, succession planning and tax strategies, among others, may be exactly what you need.

© 2014

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.


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