Building Industry Forecasts Slight Improvement in 2012

Lack of builder and buyer financing and the overall economy were cited as top business challenges heading into 2012. More than half of respondents (50.5 percent) said the ongoing recession will be a key business obstacle, while nearly a third (30.3 percent) said business banking will be a top challenge. Other key obstacles include soft home prices, government regulations and competing with foreclosures.

Construction Equipment expanded its exclusive 2012 report to include a more detailed look at the key construction industries in which core audience does its work.

Respondents rated 2011 as a poor year, the lowest ranking available, yet only forecast 2012 to be an off year. Homebuilding was the exception, forecasting another poor business year. Expectations do not appear to be affected by region, as each of the nine geographic areas forecast an off year for 2012. Expectations are likely tainted by economic and political factors as much as by their own business forecasts.

Revenue should increase this year, as the net percentage of respondents is 12.5 percent (36.4 percent expecting an increase minus 23.9 percent expecting a decrease). This compares to a net of -15.3 percent reported for 2011 (27 percent increased volume minus 42.3 decreased).

Each market expects revenue to grow in 2012, except transportation. Here, 26.6 percent say revenue will increase and 30.4 percent say it will decrease for a net of 3.8 percent. Remodeling respondents reported the greatest net increase, 23.2 percent, with 42.9 percent expecting an increase in revenue minus 19.7 percent expecting revenue to decline in 2012.  

Of course, with fewer projects in the market, competition has intensified over the past few years. This year will continue that trend. Nearly 75 percent of respondents across all regions describe their market as intensely competitive or very competitive. Respondents hope to counter this trend in their bid prices, though: 41.6 percent expect bid prices to increase and 12.9 percent expect them to decrease, for a net of 28.7 percent.

When it comes to key growth opportunities for 2012, the largest number of respondents (36.8 percent) cited remodeling activities, followed by building energy-efficient homes (33.3 percent), diversifying their service offering (29.9 percent), focusing on upscale clientele (27 percent) and light-commercial work (25.3 percent).

Materials pricing will help drive up bid prices, based on responses to the survey. Overall, the net is 67.5 percent (70.5 percent anticipating an increase in material prices minus 3 percent expecting a decrease). The low end was homebuilders, reporting a net of 62.6 percent (65.1 percent increasing minus 2.5 percent decreasing).

Water infrastructure respondents expect the greatest price surge, with a net of 73.3 percent (75.5 percent anticipating an increase minus 2.2 percent a decrease).

Asked to rate the overall health of their firm, half of respondents said they were in very good or good” shape. About 18 percent reported health as very weak or weak.

Vocational weakness is seen among home builders, where 35.4 percent reported very good or good health. Firm health was very good or good for 44.6 percent of remodelers, and 49.7 percent of nonresidential respondents. On the other hand, 50.8 percent of transportation respondents rated firm health as very good or good, along with 53.4 percent of fleet managers and 57.7 percent in respondents involved in water infrastructure.

– Courtesy of Rod Sutton, Editorial Director, Construction Equipment