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Ducker Worldwide confirms sentiment strong for nonresidential construction; real growth expected in private funded projects and existing facility renovation

05.23.12

Nonresidential construction industry assessment reveals an increase in sentiment toward both anticipated and realized growth. Many sources concur that the nonresidential construction industry is rebounding. Growth is attributed to an increase in private spending as well as the need to upgrade and renovate existing structures according to industry participants. Healthcare and institutional government buildings are among the identified building categories that present the strongest opportunity for growth. Finally, the industry points to more favorable growth in the Northeast, Midwest and South.

2012 growth is expected, and already being realized

Ducker Worldwide, a consulting and research firm based in Troy, Michigan recently conducted hundreds of interviews within the nonresidential construction value chain including architects, general contractors and building product manufacturers. Data obtained, validates increased sentiment and highlights what is driving growth and where growth is being realized.

  • Ducker Worldwide's findings, as well as surveys conducted by other organizations such as Engineer News Record (ENR), Wells Fargo and the Construction Financial Management Association (CFMA) indicate a 23 percent average increase in sentiment of growth from Q1 2012 versus Q4 2011
  • Future growth is also expected with approximately half of respondents interviewed by Ducker Worldwide stating optimism about nonresidential growth in 2012/2013. Other major indices such as ENR, Wells Fargo and CFMA also indicate stability and growth.

What factors are driving growth?

Respondents from the Ducker Worldwide study report an increase in private investment as well as a focus on upgrades/renovation to existing buildings.

However, growth will not be widespread

Of the thirteen verticals surveyed the strongest growth potential is expected within the office, healthcare and institutional segments from both a new construction and retrofit perspective across most regions.

Similar to category growth, there are specific regions where architects and contractors are seeing increases in activity, particularly the South, Northeast and Midwest (renovation market).

Though key segments such as healthcare, office and institutional facilities are expected to grow across most regions, there are also niche growth opportunities regionally. Including:

  • There is expected growth in the Northeast for mixed use facilities; this could be a result in the growing trend of development in existing urban areas (e.g. Philadelphia, Newark, etc.)
  • The Midwest is expected to see an uptick in manufacturing/warehouse buildings. This growth could be attributed to the recovery of the automotive industry as well as the increase in shale natural gas fracking causing a trickle effect from companies setting up and increasing operations and serving a growing demand
  • The demand for retail buildings in the west is on the rise throughout the entire coastal region

A modest recovery in 2012 is projected to evolve into a stronger upturn by 2013. Are construction industry participants poised to accelerate and capture growth during this bounce back?

The economic recession has significantly impacted the construction industry. Though recovery is on the horizon, the recession has created an opportunity (and need) for companies to reassess their model for sustainable growth going forward.   Primary market research can help define the appropriate strategy and will create an intelligence advantage that can dramatically increase a supplier's likelihood of success and help answer the following questions:

  • Does our business model have to change to be in a differentiating position as the market continues to recover? Should this entail incremental adjustments to an existing strategy (e.g. focus, timing, etc.), or development of a new strategy?
  • Do we need to change our product innovation/ new product development process in order to meet new or adjusted demands?
  • Do we understand how the market has shifted and, as a result, the needs of our customers has transformed?
  • Do we understand where our pricing should be within the value chain; are we managing our pricing program effectively and profitability?
  • What new opportunities exist in our core markets/ segments, as well as new segments (regions, verticals)?
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