By Karen L. Edwards, RCS Editor.
FMI Corporation, a leading provider of management consulting and investment banking services to engineering and construction, infrastructure and the built environment, has released its 2019 construction outlook for the U.S. and Canada. Throughout 2019, the report states that FMI expects Engineering & Construction (E&C) spending to continue growing at the annual rate of 3%. However, they do anticipate a moderate deceleration in growth rates for residential, nonresidential building and nonresidential structures market sectors.
The Architectural Billings Index, which usually leads construction activity by nine to 12 months, indicates that growth should remain steady as well. The company also expects mergers and acquisitions to remain strong throughout the year, despite 2018 seeing over 400 closed or announced transactions and a 33 percent increase in deals over 2017. The strong interest in M&A is a result of several factors including interest from private equity groups, companies looking for growth and the fact that baby boomers are retiring and selling their businesses.
An area to watch is the evolution of construction technology startups. In the last 10 years more than $10 billion has been allocated to funding construction technology according to FMI. RCS partner Trimble acquired Viewpoint for $1.2 billion in order to “round out Trimble's comprehensive construction technology portfolio and position Trimble to further its strategy to lead the industry's transformation.”
Construction tech companies are in growth mode right now while times are good, but they will be tested to maintain that when the next downturn hits. FMI’s report states that the next downturn could hit in the next 12- 24 months and the industry needs to prepare for it now.
Preparing for the next downturn.
The Great Recession of 2008 taught the industry a lot of hard lessons. Many contractors are too busy just trying to keep up with their current workloads and struggling to find labor that they don’t have the time to think about preparing for the next downturn. FMI shared the following 7 key lessons that E&C firms should learn from:
The report stresses the importance for businesses to also get back to the basics. Be sure your company has structured process around communications and planning. Make sure your team understands your goals for the business and be sure you have the right infrastructure in place to allow your team to do their jobs successfully.
Key Takeaways from the 2019 Outlook
If you want to take a deeper dive into the report and the specific numbers you can check it out here.
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