The First Facility Management Blog

Owners of construction and contracting businesses expressed concern about their business prospects during the next 12 months as the Small Business Research Board (SBRB) said that its Small Business Confidence Index (SBCI) fell during the third quarter for the first time since last year. More than 800 small business owners participated in the nationwide poll.

The lower construction and contracting SBCI resulted from heightened concern about growth in the economy the next 12 months and plans by 46% (a decrease of four points) of the respondents to reduce hiring during the same period. Respondents said they were prepared to decrease staff, despite 54% of the participants (two points more than the prior quarter) reporting they expect to attain higher revenues.

Outlook for the general economy is for the next 12 months?
41% better
22% worse
37% no change

Revenue expectations for the next 12 months?
37% increase of 10% or more
17% increase of less than 10%
38% will be about the same
4% decrease of less than 10%
4% decrease of 10% or more

Expectation for hiring new employees during the next 12 months?
46% increase hiring
10% decrease workforce
30% remain the same
13% unsure

“Small construction and contracting firms are experiencing the realities of the marketplace and thus feeling less confident about chances for a turnaround in the economy the next 12 months,” observes Gregg M. Steinberg, president of IPA. “However, it is appears most are taking actions to manage labor costs during this time so as to minimize the downside risk.”

The SBRB ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations. The SBRB conducts these studies for the benefit of small business owners and managers.

The universe of participants is developed from among small businesses across the United States. The SBRB study is a voluntary survey conducted quarterly.

* Numbers may not equal 100% as a result of rounding

According to the 2007 AEC Industry Outlook: Strategy and Insight for Design & Construction Firms, a new report from ZweigWhite, health care, higher education, and water/wastewater will be among the hottest markets for design and construction firms in 2007, while the parks and recreation, government, and financial markets are expected to struggle.

The AEC (architecture, engineering, and construction) business has outperformed the U.S. economy as a whole in recent years, and the majority of firm leaders surveyed in conjunction with the ZweigWhite report remain optimistic about the industry’s performance heading into 2007. The survey found that 55% of respondents expect the AEC business will outperform the U.S. economy in 2007, while only 12% expect the design and construction industry to lag.

”Despite a slight eroding of confidence in the performance of the AEC business heading into 2007, resulting from increased materials costs and other obstacles, the majority of firm leaders (57%) still project their business will be ‘outstanding’ or ‘excellent’ next year,” says Elaine Kornbau, managing editor of market intelligence reports at ZweigWhite. ”Although residential construction slipped in 2006 and is expected to continue its current downward trend through the middle of 2007, strong growth in the health care, higher education, and water/wastewater markets will continue to provide opportunities.”

Based on a market-by-market analysis, the 2007 AEC Industry Outlook identifies 10 hot markets to watch in 2007. The top five markets include:

1. Health Care. The increases in health insurance costs that are bad news for AEC firm leaders trying to control costs are good news for firms working in the health care market. The increases in health care expenditures will result in additional capital available for health care projects.

2. Higher Education. Higher education construction is at record levels, and colleges and universities are still upgrading and expanding residence halls and educational facilities to deal with increasing enrollments. Improvements to state budgets should improve public funding for capital projects, and a rebounding stock market will be good news for college endowments at private colleges and universities.

3. Water/Wastewater. Driven by sprawling populations, water scarcity, federal and state regulations, and aging infrastructure, the water and wastewater sector has been a strong sector in the environmental industry in recent years. The one potential obstacle to the market is a slowdown in residential development.

4. Highways and Bridges. The passage of SAFETEA-LU in August 2005 should continue to keep highway and bridge projects going strong. Owners are still working off pent-up demand in the market due to the nearly two years that passed before a long-term surface transportation bill could be agreed upon.

5. Power and Energy. The sharp increase in energy prices in 2005 and 2006 have provided energy companies with soaring revenue and profits to invest in capital in major infrastructure projects, making up for a few years of underinvestment. In addition, it has pushed public support and improved the financial viability of the development of alternative energy sources.

The 2007 AEC Industry Outlook examines all of the major markets served by design and construction firms. The report also identifies the key trends that will affect the AEC business in 2007 and provides information on the strategies AEC firms will use to grow in the coming year.

This report is available from the publisher for $295, plus $8 shipping and handling.