Public projects will decline, prefab trends will grow, and E&C firms will increasingly drive the nation’s construction agenda, consultant FMI says in a crystal-ball look at 2012.
Overall, FMI’s 2012 U.S. Markets Construction Overview offers little change from this year in its prediction of a long, slow recovery, but a few trends stand out.
While the popularity of design-build projects will continue to grow, the design piece will come increasingly from engineering firms at the expense of the nation’s architects, FMI contends.
|“While select markets are overbuilt, most are not,” says FMI. Many markets still have “significant pent-up demand.”|
Engineering and Construction (E&C) firms have a strong and growing edge in a field crowded with consultants, design firms, general contractors and other parties jockeying for the primary relationship with the client.
“As this battle continues, we see significant entry of engineering firms into the construction business and vice versa,” FMI says. “As the ‘theory’ of design and construction convergence has become a market reality, it is clear that engineering has led as the design discipline to make it happen.”
That is bad news for architectural firms, which “remain relatively small, fragmented and independent from construction,” FMI reports. “The number of real design-build firms that feature architects integrated with constructors is small.”
Meanwhile, the report adds, “the number of E&C firms in the U.S. is significant, growing and composed of firms with critical mass and financial strength.”
Nor is there much hope in sight for the long-battered domestic housing market, which will continue to be “a cloud hanging over U.S. economic recovery,” according to FMI.
New starts are currently only about .03% of GDP, although historically they have risen to .5% in the two years following recessions, FMI says.
So bleak are prospects for the housing market—historically, the engine for economic recovery in the U.S.—that FMI explores what the nation’s first non-housing-led recovery might look like. Such a recovery “is unprecedented, but we believe possible,” FMI finds.
FMI also echoes the widely expected decline in public spending for capital projects at every level..
“Government construction has been rather a safe harbor for some firms the past few years, but budget constraints are expected to cause serious problems here,” the company reports.
Still, construction is not altogether doomed, FMI adds. “While select markets are overbuilt, most are not,” the report says. “In many markets, quite the opposite is true and there is significant pent-up demand.”
Several trends reported in recent years are expected to remain in play, according to FMI. These include:
• Consolidation, especially at the large end of the market;
• Globalization, reflected in further U.S. penetration of international firms and growing international pursuits by U.S. E&C firms; and
• Technology advancements to aid in these expansion strategies and project delivery systems.
Other highlights include:
• A “predictable return” by pinched owners to a “price only” procurement mind-set for capital projects;
• Slowly increasing use of public-private partnership (P3) project funding;
• Greater use of multi-trade prefabrication, modular construction and other efficiencies;
• More succession and transition challenges among Baby Boomer-owned businesses; and
• Increased demand for sustainable construction and LEED-certified buildings.
FMI’s annual U.S. Markets Construction Overview includes a comprehensive report on vital construction trends and forecasts the growth or decline in each market segment, noting both short-term and long-term considerations.
For more information, visit www.fminet.com/resources, email Kelley Chisholm, or call 919.785.9215.