For the second consecutive year, PSMJ asked me to write a forecast book for the AEC Industry. PSMJ’s 2010 AEC Firm U.S. Market Sector Forecast offers AEC firms a look at trends, key issues and expectations for what is likely to be an evolutionary, if not revolutionary, year for the industry.
The book is available now, in time for AEC firms to plan for 2010.
Chapters include “Ten Issues Likely to Affect Your Firm in 2010,” U.S. and world markets overviews and sector-by-sector forecasts for AEC firms in 2010. It also provides a prediction of the best and worst markets for 2010, as well as recommended success strategies.
Here’s the introduction:
In the late summer and early fall of 2008, as the AEC industry looked hopefully ahead for signs that the recession would be short and mild, the U.S. economy took a series of body blows that sparked talk of a modern-day Great Depression. Bank failures, rampant inflation, unstable pricing and the ever-worsening housing slump had the nation and the world reeling.
These dire predictions, it seems, were overblown. By the third quarter of 2009, the economy had halted its freefall and emerged from the recession, prices had stabilized and even single-family housing showed sparks of a recovery.
Despite the recent positive signals, 2009 has been a challenging year, both for the economy as a whole and for many firms in our industry. Unemployment continued to rise, eventually clicking over the 10 percent mark in November, even as the economy jolted back to life. In 2009, we witnessed massive layoffs and hiring freezes, canceled and delayed contracts, withering numbers of opportunities against greater levels of competition, price wars and firms selling out or closing.
Yet, amid these hard times, some AEC firms thrived. With all that’s stacked against them, how could these companies enjoy fast-rising revenue, better-than-average profit, stout backlog, and record growth? What did they do right that many other firms did not?
There is no single answer. Some success stories are from firms positioned in a favorable niche – health care or the federal government, for example. Other winning firms are diversified enough to withstand the downturn in a few market sectors, or they have such rock-solid client relationships that the little work being done is still going to their shop. For some, success is simply a matter of operating at a level of efficiency that allows them to weather even the worst of storms. More than likely, it is a combination of the above.
This brings us to 2010, a year that most economists and experts view as one of slow transition back to a robust economy and a healthy industry. Some pain will continue, they tell us, particularly in non-residential construction sectors such as office and hospitality. In its 6th Annual Construction Web Event, market research firm IHS Global Insight said the nonresidential construction market will drop 25 percent in 2010. Other markets won’t suffer as badly, they say, but the boom times are still somewhere off in the distance.
Knowing where the experts see the markets heading is valuable information, even if much of it is conjecture. Firms with insight into the direction their primary markets are going – up, down, or sideways – can better hone their planning process as they allocate marketing and production resources for the coming year. This knowledge, and the actions it inspires, can be the difference between being a casualty or a winner in 2010.
What this information should not do, however, is send firms scurrying after the latest hot market while they abandon sectors that have cooled. As firms succeeding in the downturn have proven, it is best to capitalize on current conditions – whatever they may be – by leveraging and improving upon your strengths as a professional services provider.
Also, while this book focuses almost exclusively on 2010, it is important to keep long-term trends in mind. Predictions that health care and K-12 will be off their games in 2010 may prove correct, but demographics and other drivers indicate that both are good long-term bets.
At the same time, the American Recovery and Reinvestment Act (ARRA) stimulus package may be propping up some market sectors. When it goes away, markets benefiting greatly from ARRA could dry up unless a new source of revenue has filled in to replace it.
ARRA is a recurring theme in this book. Though it didn’t live up to initial expectations, ARRA still played a major role in revitalizing the economy and the AEC industry. Expect more of the same through most of 2010, just to a diminishing extent with each passing quarter.
Finally, this is not a book by economists, but by researchers. It is the product of conclusions drawn from interviews with industry practitioners and experts, vast amounts of secondary research on the industry and its markets, and the projections of the industry’s most respected economists.
We hope you enjoy this publication and, with its help, you have a successful 2010.
— Jerry Guerra
November 6, 2009