Nonresidential Building Construction
Description
Companies in this industry construct nonresidential buildings, including industrial plants and commercial and institutional facilities. Major companies include Clark Construction Group, Turner Construction, and Whiting-Turner Contracting (all based in the US), as well as Balfour Beatty (UK), China State Construction (China), HOCHTIEF (Germany), and Skanska (Sweden).
The global construction market is expected to reach about $20 trillion in 2028, according to the Business Research Company. China, India, and the US are expected to account for about 50% of all global growth.
The US nonresidential building construction industry includes about 42,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $460 billion.
COMPETITIVE LANDSCAPE
Nonresidential construction activity depends heavily on corporate and government spending. The profitability of individual companies depends on accurate project bids and efficient operations. Large companies have advantages in their ability to engage in multiple projects simultaneously and to engage in many types of construction. Small companies can compete effectively by specializing, working in a limited geography, or serving as subcontractors on larger projects.
The US industry is highly fragmented, with the top 50 largest companies counting for more than 20% of the industry revenue, although competition for the largest projects is typically limited to major companies with extensive capabilities and resources. Because the industry struggles with labor shortages, the ability to attract and retain adequate numbers of skilled workers (as well as engineers and managers) can be a crucial competitive differentiator, particularly when bidding on projects in remote locations.
Competitive Advantages:
Advanced IT - Construction companies are increasingly looking to technology to increase their productivity. Companies utilize software for managing processes from design and bidding to procurement and project management. Technologies such as robotics, Internet of Things (IoT), 3D printing, and autonomous vehicles are also emerging in the construction sector.
Reputation/Track Record - Although builders typically bear much of the responsibility for cost overruns on a project, limiting risk is still a primary concern for clients investing in major construction. Companies with a record of completing projects on schedule and within budget hold a major competitive advantage when bidding for jobs; establishing such a reputation can be a major challenge.
Service Diversity - Nonresidential construction companies operate in a number of markets where demand is cyclical. The ability to serve customers in a wide range of sectors can be crucial to surviving downturns in volatile markets.
Companies to Watch:
China State Construction Engineering Corporation (CSCEC) ranks among the largest diversified construction companies in the world, doing business in more than 100 countries.
Skanska has been a leader in adoption of advanced construction technologies, including robotics and 3D printing.
Turner Construction helped pioneer such areas as green building and the use of digital modeling to become one of the largest construction companies based in North America.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major services include educational building construction, office building construction, which both account for about 10% each, health care and institutional building construction, and additions, renovations, and alterations, which both account for about 7% each.
Critical components of company operations include bidding on projects, managing labor and equipment, and procuring materials. Larger companies may own much of their equipment and retain full-time crews, while smaller firms typically lease equipment for a particular project and hire much of their labor on a project basis.
General contractors provide services through several types of arrangements with varying levels of risk. Under a fixed-price contract, companies are committed to providing all of the resources necessary to complete a project for a specified sum. Although fixed-price contracts subject companies to significant risk, they also provide opportunities for higher profits. Under a cost-plus-fee contract, companies are reimbursed for project costs and earn an additional fixed or "award" fee. Award fees provide incentive for contractors to finish faster or under budget. Cost-plus-fee contracts limit companies' risks but can also limit profits. Guaranteed maximum price (GMP) contracts provide cost-plus-fee arrangements up to a maximum price. Companies are at risk for costs in excess of the GMP, but such contracts may include sharing agreements with the owner on any cost savings. Under unit price contracts, a fixed fee is assigned to distinct units of work, or categories of cost, and the project owner is responsible for estimating the quantity of units required. Contracts typically contain penalties for late completion.
Larger companies typically negotiate an overall contract with a project owner and function as the prime contractor, acquiring equipment and materials, managing the construction schedule, and hiring specialist subcontractors for much of the actual construction work. Many project owners prefer to use the same firm to design and build the project, so that accountability lies with one company. The growing popularity of design-build contracts has encouraged many construction companies to develop a design capability or acquire a design firm.
The global construction market is expected to reach about $20 trillion in 2028, according to the Business Research Company. China, India, and the US are expected to account for about 50% of all global growth.
The US nonresidential building construction industry includes about 42,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $460 billion.
COMPETITIVE LANDSCAPE
Nonresidential construction activity depends heavily on corporate and government spending. The profitability of individual companies depends on accurate project bids and efficient operations. Large companies have advantages in their ability to engage in multiple projects simultaneously and to engage in many types of construction. Small companies can compete effectively by specializing, working in a limited geography, or serving as subcontractors on larger projects.
The US industry is highly fragmented, with the top 50 largest companies counting for more than 20% of the industry revenue, although competition for the largest projects is typically limited to major companies with extensive capabilities and resources. Because the industry struggles with labor shortages, the ability to attract and retain adequate numbers of skilled workers (as well as engineers and managers) can be a crucial competitive differentiator, particularly when bidding on projects in remote locations.
Competitive Advantages:
Advanced IT - Construction companies are increasingly looking to technology to increase their productivity. Companies utilize software for managing processes from design and bidding to procurement and project management. Technologies such as robotics, Internet of Things (IoT), 3D printing, and autonomous vehicles are also emerging in the construction sector.
Reputation/Track Record - Although builders typically bear much of the responsibility for cost overruns on a project, limiting risk is still a primary concern for clients investing in major construction. Companies with a record of completing projects on schedule and within budget hold a major competitive advantage when bidding for jobs; establishing such a reputation can be a major challenge.
Service Diversity - Nonresidential construction companies operate in a number of markets where demand is cyclical. The ability to serve customers in a wide range of sectors can be crucial to surviving downturns in volatile markets.
Companies to Watch:
China State Construction Engineering Corporation (CSCEC) ranks among the largest diversified construction companies in the world, doing business in more than 100 countries.
Skanska has been a leader in adoption of advanced construction technologies, including robotics and 3D printing.
Turner Construction helped pioneer such areas as green building and the use of digital modeling to become one of the largest construction companies based in North America.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major services include educational building construction, office building construction, which both account for about 10% each, health care and institutional building construction, and additions, renovations, and alterations, which both account for about 7% each.
Critical components of company operations include bidding on projects, managing labor and equipment, and procuring materials. Larger companies may own much of their equipment and retain full-time crews, while smaller firms typically lease equipment for a particular project and hire much of their labor on a project basis.
General contractors provide services through several types of arrangements with varying levels of risk. Under a fixed-price contract, companies are committed to providing all of the resources necessary to complete a project for a specified sum. Although fixed-price contracts subject companies to significant risk, they also provide opportunities for higher profits. Under a cost-plus-fee contract, companies are reimbursed for project costs and earn an additional fixed or "award" fee. Award fees provide incentive for contractors to finish faster or under budget. Cost-plus-fee contracts limit companies' risks but can also limit profits. Guaranteed maximum price (GMP) contracts provide cost-plus-fee arrangements up to a maximum price. Companies are at risk for costs in excess of the GMP, but such contracts may include sharing agreements with the owner on any cost savings. Under unit price contracts, a fixed fee is assigned to distinct units of work, or categories of cost, and the project owner is responsible for estimating the quantity of units required. Contracts typically contain penalties for late completion.
Larger companies typically negotiate an overall contract with a project owner and function as the prime contractor, acquiring equipment and materials, managing the construction schedule, and hiring specialist subcontractors for much of the actual construction work. Many project owners prefer to use the same firm to design and build the project, so that accountability lies with one company. The growing popularity of design-build contracts has encouraged many construction companies to develop a design capability or acquire a design firm.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
Pricing
Currency Rates
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