As the economy has continued to recover, construction projects have slowly gained momentum. But where does our industry fall in terms of overall recovery to pre-2008 levels? A number of different factors are pointing projections in the direction of growth. The reduction of the unemployment rate by half since 2008 is reflected in strong economic growth, while increased government spending on infrastructure helps bolster the construction economy.
Is Contracting Getting Ready for Growth Again?
Many aspects of our economy are showing signs of strong construction growth. Hotel and travel construction have been seeing significant growth, with spending increasing by half in 2015 and by a quarter again in 2016. Millennials are leaving home and purchasing their first homes while beginning to speculate in the market. Though online sales have increased, brick and mortar stores are quickly modifying their stores to meed customer demand for a unique experience, driving commercial construction and renovation.
Let's start by seeing where we were last year. 2016 saw a solid 4% increase in overall construction starts, with strong growth of 8% in residential starts, a 4% increase in commercial starts and a 2% increase in non-building starts. Projections for 2017 are even better, reflecting an overall 7% increase in construction starts, with a whopping 10% increase in residential starts over last year. Commercial starts will increase to 6%, with offices leading the charge at a predicted 8% increase in starts with the improved job market. Non-building is expected to continue to see a 2% increase in starts, especially in transportation and infrastructure. It's expected that more growth will happen in the southern and eastern parts of the US, with West Virginia leading the charge at 22% growth, followed by Arizona and Mississippi at 15% and California, Idaho, South Carolina, New Jersey and New Hampshire at 13% growth in construction starts.
Real-World Market Signs
But beyond projections, what other signs are starting to appear that construction will do well? Public-private partnerships are becoming more common, allowing government agencies to upgrade their facilities without having to spend money that hasn't been budgeted yet. This leaves money in the budget for new projects and facilities. Millennials are getting out of school, out of their parents' homes and back into the workforce, reversing the strong unemployment nearing 20% for that age group during the worst of the recession. Now that they've become more secure in their jobs, they're starting to look at starting families and buying or renting their own homes, increasing the construction of single-family and multi-family new starts. At the same time, existing-home sales have declined by 1.8% in June and are only 0.7% above last year at this time, driving new-home construction and sales now that low-cost inventory has been picked up by investors.
How to Prepare for Growth and Maximize Profits
However, there is one serious drawback to the strong growth we're seeing – labor. With far fewer unemployed persons looking for work, it's more important than ever to get a quality crew put together without breaking the bank. At the same time, demand for labor for your back-office tasks can increase your costs. How do you prepare your company for growth and improve profits when facing these circumstances? Many companies have turned to digitization, which allows you to streamline and automate any number of non-physical tasks such as the quote process, takeoffs, accounting and customer relations. Furthermore, companies that have been early adopters of digitization have seen significant gains in their market share and higher levels of profitability while those who wait to adopt digital options for their business fall behind.
See Improved Profitability in the Future
But what if you could make the change to digitization now and improve your profitability from the start of this new growth? When you digitize your construction business, you're reducing the amount of overhead tied up in office work and improving the amount of profitability you see because of increased time in the field.
This process starts during estimation, as soon as you learn about a new project. You can import your plans into your software, perform your takeoff on a single screen without a lot of printing, markers or window changing. Once your takeoff is complete, you automatically apply pricing from an automatically-updated database from a national vendor. The system even checks against national averages to ensure a silly mistake doesn't cost you your profits on the project. You can then export your finished estimate into a customized Word, Excel or Adobe Acrobat format to send to the client, upholding your company's image as a professional contracting firm.
Once you've won the job, imagine not having to deal with accounting mistakes and hassles as the prices you've quoted are automatically moved through the workflow into your accounting office. Changes to the project are quickly estimated and worked through the same workflow, even in the field using cloud computing. Once the project is done, follow-up emails are automatically sent to your clients, allowing you to focus on your current and upcoming projects rather than sinking more time into a done deal in the interest of customer relations. The data that has been entered over the course of the job analyzes the costs and benefits, using effective analytics to help you determine the best projects for your company's profitability.
Connectivity across the system allows you to link all aspects of the process from initial development to follow-up emails and analytics that determine the most profitable project types for your company. Construction growth is happening now, but are you taking advantage of the opportunities digitization provides? Instead of taking advantage of growth for moderate profits while dreading hard times to come, why not digitize? Esticom lets you reduce your business' overhead workflow while improving your profitability. Learn how well it can work for your construction company by taking advantage of our free trial. This year, spend more time making money in the field and less wasted time in the office.