Posts Tagged ‘market’

“Charting” and “Graphing” the A/E/C Firm Forecast for 2018 and Beyond

Wednesday, December 6th, 2017

The 285 pages of the recently published report, The 2018 A/E/C Firm U.S. Market Forecast, include almost 90 tables and graphs to help illustrate the book’s analyses and projections. Published in November by PSMJ, the Forecast assesses seven major markets and more than 40 sectors and subsectors for their outlook heading into 2018. The thoroughness of the research is indicated by the more than 30 pages of references in the Appendix — over 200 sources total.

Though the book focuses on 2018, it seeks to provide insight into years 2-5 in the cycle as well. It also looks at the industry’s outlook and the various market sectors from the outside in, addressing how geopolitical, economic and societal indicators will affect the markets going forward.

As for the tables and graphs, I’d like to share a few of them to give some sense of how they contribute to the overall product (which is available for purchase at http://store.psmj.com/2018-a-e-c-firm-u-s-market-forecast).

Chart 1, Page 9. After the introduction, the book begins with 10 trends in the industry. These include several technology-based issues, including The Internet of Things, big data, autonomous vehicles and building information modeling (BIM). One of the trends in this year’s version of the book, which has been included as a trend all seven times I’ve written a book like this, is about hiring (“Hiring Challenges Rise Up”). A few years ago, the gist of the story was how the recession and post-recession economy offered opportunities for staff upgrades. Now, we’re back to the war for talent. The chart below shows how the number of U.S. architecture grads has flatlined over the years, even decreasing some. Engineers, meanwhile, experienced a notable dip beginning in the 1980s and carrying through to about 2010, at which point the line starts a slow, steady climb.

The data comes from the informative, recently released Projections of Education Statistics to 2025, from the National Center for Education Statistics. Graduation rates for architects, in particular, are forecast to remain muted, while engineers may continue to see small gains across all disciplines, according to the publication.

The chapter delves into other hiring challenges, including gender issues, immigration and demographics. As with all of the trend chapters, it includes strategies as well.

Here are two of the nine strategies in this section:

  • Reward your superstars inordinately. Don’t worry about upsetting your average employees by taking care of your above-average ones. If you don’t reward for performance, you’ll end up losing the high performers and keeping the mediocre (or worse) ones.
  • Make sure your office is a place people want to be. Take a fresh look at the environment that your people are working in. If you weren’t used to it, is this a place you would want to come to every day? Are you taking measures to build a corporate culture that fits the firm and meets your people’s needs? Is your firm hospitable to women and minorities?

Table 17, Page 105. Because many A/E/C firm sectors and subsectors are driven by local and regional factors, the book focuses on “where” things are happening as much or more than “why” and “when.” For the multifamily market, as well as some of the commercial (e.g., office, industrial) and transportation markets (e.g., airports, ports), we included a table or bullet list that addresses the status and outlook by city or state. Below is an example.

Sources for the multifamily and commercial markets include the exceptional research arms of real estate companies such as Marcus & Millichap, Colliers, CBRE and Cushman & Wakefield. Table 17 includes a similar analysis for over 40 metros.

 

Graph 41, Page 212. A major finding of the health care section of the book is that the trend toward smaller, more flexible space in the sector is likely to continue. Medical office buildings and urgent care centers appear to be on the upswing, while major hospital projects — still occurring at times — are not expected to be as common. The continued reduction of time that patients spend in a hospital bed is an indicator of why this is so.

Graph 25, Page 152. In the final chapter of the book, each of 41 sectors and subsectors are ranked “best to worst.” In reality, most of the markets appear to be in at least decent shape heading into 2018. The purpose of the rankings is to put some context into the relative strength or weakness of each market, so it includes a “grade” (A-F) and an arrow indicating if it is heating or cooling, and by how much.

This is, of course, an imprecise exercise, but based in the knowledge and insight gained through hundreds of hours of research and discussions with industry owners, experts and practitioners.

Among the highest-rated of the markets is “Industrial/Warehouse,” which is benefiting from the e-commerce boom and its various practices. This includes robotics technology, “last-mile” delivery and so on. In addition to moving ever closer to the end user, warehouses are also a prominent piece of the increasing buzz around ports and their distribution networks.

The graph below illustrates how strong the warehouse market has been, nationally speaking.

Highway Trust Fund reauthorization in limbo

Tuesday, January 5th, 2010

On December 19, President Obama signed a third extension of the Highway Trust Fund legislation that would otherwise have expired on September 30, 2009. The latest extension is through February 2010.

This is the same exercise the legislative and executive branches go through every time federal surface transportation funding comes up for reauthorization. That we’re used to it now doesn’t make it any less painful or troublesome to the industry.

In my recent report, PSMJ’s 2010 AEC Firm U.S. Market Sector Forecast, I noted in the chapter entitled “10 Issues Likely to Affect Your Firm in 2010” that the reauthorization issue was also on the list in the 2009 edition, adding, “[Let’s] hope it doesn’t make the list next year as well.”

Here is an excerpt from that section of the PSMJ Forecast:

[Last fall,] Rep. James Oberstar (D-Minnesota) attempted to pass a $500 billion, six-year transportation plan that was eventually set aside amid the health care and climate change debates.

[Immediate Past President of the American Society of Civil Engineers (ASCE)] Wayne Klotz says the reauthorization issue is critical for firms across the industry, even those not in transportation, as its effects reverberate throughout the AEC professions.

“If they let the legislation expire and pass a continuing resolution, as they did at the end of the last bill, people will lose their jobs all around the country,” says Klotz. “It happened last time. That’s why we’re making such a strong push to get this done.”

A lack of authorizing legislation could handcuff departments of transportation, forcing them to delay work on large, long-term projects. “Under our own state laws, DOTs can’t commit to a project unless they can show a revenue stream to fund it,” Klotz says.

The length of the delay will make a big difference in its impact on the industry, Klotz adds. “If they negotiate and can come up with something in March or April, that’s one thing,” he says. “But if it gets tied up in mid-term elections and shoved out until 2011, that’s a horse of a different color.”

Which is it going to be? Klotz says he has no idea. But, he says, the industry can’t even maintain the current, insufficient level of activity without a transportation funding mechanism in place.

Predictably, other AEC industry organizations are lining up to support passage of the new legislation. In a position paper, the American Council of Engineering Companies (ACEC) (Washington, DC) says, “While ACEC supported the investments for transportation in the American Recovery and Reinvestment Act, that funding has largely been directed to simple resurfacing projects, and much more needs to be done to address the serious backlog of more significant improvement projects.”

ACEC says that a new surface transportation bill, with dramatically increased multi-year funding guarantees, is necessary to allow states to invest in major design and construction projects.

The group cites a National Surface Transportation Policy and Revenue Study that says a minimum $225 billion in annual investment from all sources (including federal, state and local) for the next 50 years is necessary to upgrade existing systems to a state of good repair and create a more advanced surface transportation system. “The U.S. currently invests $85 billion annually from all levels of government, less than 40 percent of what is necessary,” ACEC says.

Oberstar’s bill would be a step in the right direction, but it won’t be an easy fight. For the transportation industry’s sake, we hope it won’t be a long one either.

Available now! PSMJ’s 2010 AEC Firm U.S. Market Sector Forecast

Friday, November 13th, 2009

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