InSight

Exit and Growth Strategies for Middle Market Businesses

M&A Trends | Engineering & Construction Industry

By Jeff Johnson | Aug 25, 2016

Engineering & construction industryEngineering & Construction industry companies reliant on business from energy producers may consider shifting their bidding efforts to other sectors. While 44 US states and the District of Columbia added construction jobs between March 2015 and March 2016, five energy-producing states logged construction employment declines, according to Associated General Contractors of America. Job gains were concentrated in California, Florida, New York, and Massachusetts, states that altogether added 100,400 construction jobs year-over-year. Two of the nation’s smallest states, Hawaii and Rhode Island, saw the highest percentage increases in new construction jobs. Due to declining prices for coal, oil, and other fuels, demand for construction is waning in states that rely on energy extraction for economic stability. North Dakota and Alaska, big producers of coal and natural gas, suffered the highest percentage of construction job losses during the year, along with Wyoming, Kansas, and West Virginia.

Engineering services firms that specialize in infrastructure projects should anticipate rising requests to bid on tunneling projects as more big cities turn to underground development. Creating demand for specialized engineering services, more cities worldwide are extending their reach underground rather than building up, thanks to new technologies, analytical tools, and materials. Urban centers are tunneling at a record pace, according to The Wall Street Journal, as subterranean development has grown highly technical and surprisingly less expensive. Digging manually can cost nearly $1 million per foot as compared to about $19,000 per foot using a giant boring machine.

Industry Indicators 

  • The value of US nonresidential construction spending, an indicator of the health of the construction market, rose 7.1% year-to-date in May 2016 compared to the same period in 2015.
  • The value of US residential construction spending, an indicator of the health of the construction market, rose 9.8% year-to-date in May 2016 compared to the same period in 2015.
  • US steel mill product prices, an indicator of commodity steel product costs used in construction, fell 4.6% in June 2016 compared to the same month in 2015.

Posted by Jeff Johnson.

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