How the Recession Is Affecting the Commercial Construction Industry

The ‘Great Recession’ theoretically lasted about 18 months, from 2007 to 2009. Recovery has been agonizingly slow in many industries but we are now in 2015 and the construction industry is more rapidly shrugging off the residual effects of the recession.

How Bad Was It?

Even though construction industry is cyclical and recession typically follows a boom period, nothing could have prepared it for the harsh and widespread reach of the recession:

Residential: Homeowners defaulted on homes and others delayed buying homes, leading to a glut of residential real estate languishing in realtors’ inventory.

Commercial: Commercial construction also was hard hit, severely impacted by the federal budget sequester and eventual-but-temporary shutdown, followed by scaled back government spending, and sharply reduced lending practices.

Institutional: Institutional construction remained stagnant, affected by the same limitations and funding problems that the commercial construction sector faced.

How Were Construction Workers Affected?

Nevada, California, Florida, and Arizona are typically areas with plenty of construction work. But the recession changed that:

Nevada employed an estimated 146,000 construction workers at the peak of its construction boom. That number was reduced by 59 percent.

Arizona’s construction employment dropped 50 percent from its pre-recession industry peak.

Florida was close on the industry-related unemployment heels of Nevada and Arizona, losing 40 percent of its construction workforce.

California fared better but still recorded a 28 percent drop.

According to the U.S. Bureau of Labor Statistics (BLS), approximately 2.3 million construction workers lost their jobs in the recession (nearly 30 percent of the total number of lost jobs).

The overall construction industry has an estimated 1.4 million fewer construction workers in 2015 than it did in 2007.

The Construction Outlook in 2015 and Beyond

Happily, the U.S. and its construction industry continue to move away from the harshest effects of the Great Recession. Industry observers expect to see these improvements:

Non-residential construction: picking up and looking more solid, especially with the expected 2.6 percent real GDP growth in 2015. This sector may rise by 8 percent with growth in office buildings, hotels, and industrial facilities.

Single family housing: expected to increase by 11 percent in the number of residential units, thanks to easier access to home mortgage loans.

Manufacturing plant construction: will probably drop about 16 percent after huge increases of 2013 and 2014.

Institutional construction: expected to continue its moderate upward trend and increase 9% over 2014 results.

Residential construction: called the potential ‘wild card’ of 2015 because of rising interest rates. Existing home sales may climb toward 10 percent.

Public construction: growth will remain low due to ongoing federal spending constraints. However, transportation spending is expected to grow by about 2.2 percent.

Ironically, construction workers may not be rushing to return to new jobs. Many left the industry altogether, retraining for other employment.

Texas and North Dakota both show significant increases in construction employment. North Dakota now needs to recruit construction workers. Texas’ construction employment is up 10 percent, nearing its pre-recession peak.

Economists don’t expect the construction industry to return to its peak level (2006) until 2022 or later. However, the BLS anticipates that the fastest-growing jobs now and 2022 will be in healthcare and construction.

So while the Great Recession did a considerable amount of damage to the overall economy, individual incomes, and morale, 2015 and beyond are looking considerably more favorable in the commercial construction industry.

Major Components of Indian Construction Industry

Construction in India is the second most important activity, next only to agriculture. The country is on the path of fast development of infrastructures in the fields like education, health, power and research. At the same time, the civil construction projects are on fast tracks to improve the conditions of roads, rails, highways and bridges. In addition, the country has managed to lend construction services and products to the foreign markets too.

The construction activities offered by the construction companies in India have improved in terms of quality. The construction equipment manufacturers follow the international standards to offer advanced technology-based tools. There are four major components that work in favor of the exponentially growing sector. Here is a discussion about them.

Skilled Construction Experts

Architects, civil engineers, project managers and many other important role-players in the Indian construction industry are admired for their skills and talent. Construction project managers from India have the experience and training to supervise different types of projects. In the past one decade, many praiseworthy projects have been completed by the skilled construction teams of the country. Construction labor contraction services are offered by many Indian firms for the recruitment of these skilled workers around the world.

Quality Construction Equipments

When it comes to construction tools and equipments, there are many Indian construction equipment manufacturers engaged in this field. The equipments like bulldozers, scrapers, backhoe loaders, concrete vibrators, earth compactors, concrete mixers, hydraulic excavators and many others are manufactured in the country and supplied to different parts of the world. The focus is one manufacturing technologically advanced equipments that can safe human efforts significantly, reduce energy consumption and are safe.

Top Grade Construction Material

The Indian construction services and products are not limited to construction tools and equipments only. The manufacturers and suppliers engaged in the industry also focus on supplying high grade construction materials in different categories. Glass, ceramic, wood, plastic and many other materials are available with these industry players. In addition, these companies offer hardware materials like pipes and tubes made of materials like PVC, aluminum, copper, bronze and others. Tiles for flooring and a variety of sanitary ware products form other important categories of construction materials from India.

Impressive Construction Services

From expert construction counseling to interior decoration and house and commercial building construction, the construction services from India cover all possible fields. Turnkey industrial construction is one service which is in great demand and the experts from the country are capable of offering it. Real estate construction services from India serve the projects like construction of houses, industrial plants, corporate offices spaces and commercial constructions like shopping malls and restaurants.

The construction services from India have become more accessible with the help of the online business directories. These online marketplaces provide detailed information about the service providers from the Indian construction industry. Small and medium sized equipment manufacturers and suppliers from different parts of the company have made it possible to earn exposure for their businesses through these directories. In a way, these directories have become another major component of the industry.

The Importance of Construction Industry Solutions

It has been said that the average construction project suffers cost overruns and completion often takes longer than expected. Thanks to Pegasus this should never have to be a problem again.

By using the right industry software you will always be able to complete projects on the scheduled time and within your budget. The industry software that I am referring to is Construction Industry Solutions. With this software you will have complete management control over contracts and sub-contractors as well as effective cash management.

Businesses need to track the costs of purchases and may have sub-contractors who require payment under HMRC’s construction industry scheme regulations. You need to keep on top of payments and always remember that effective cash management is key to making a profit. Construction Industry Solutions was written for SME contractors in the construction and allied industries. It was designed to give instant up-to-date information so that you know exactly what is owed and to who as well as knowing when different payments are due.

Cash management is an essential feature of the construction industry and can make a serious difference to the profit of a contract. Construction Industry Solutions captures all of the relevant contract information across all stages of a job so that the statuses of contracts are immediately available.

One of the key features of Construction Industry Solutions is the contract sales ledger. This maintains the details of current payment applications. It allows current and cumulative revenues together with retention, main contractor discount, etc. Also with contract sales ledger payment, when it is received, can be entered in batches and allocated to one or more applications.

Another key feature that will benefit your construction business is contract purchasing. The purchase order processing system allows the costs of a contract to be monitored by raising purchase orders against a specific contract. As deliveries are received and invoiced, the purchase order is updated.

Contract purchasing is integrated with stock control, allowing stock to be ordered from suppliers against a contract. This feature of construction industry solutions allows you to allocate, reserve and issue stock to a specific contract.

This piece of Pegasus software gives you complete control over all aspects of contract management including payment applications, VAT invoicing and cash receipt matching. It is also fully integrated to sales, purchase and nominal ledgers as well as cashbook and payroll. Construction industry solutions also conform to the requirements of HMRC’s construction industry scheme.

The requirements within the construction sector are highly specialised and Pegasus recognises these complex business requirements within the construction sector. Construction industry solutions also integrates with Opera II, sage line 50 and sage mms.

If you have a business within the construction sector and have not yet invested in a software solution to your management aspects and cash flow aspects then it is highly recommended that you do. Software solutions for the construction industry can dramatically change the way in which your business is run for the better giving you more effective management commitments and more control over your finances.

How the Recession Has Affected the Commercial Construction Industry

For some time, I have asked myself (and others), “What was so great about The Great Recession?” This economic crisis has been deemed by the International Monetary Fund (IMF) as the worst world-wide recession since World War II. Its impact has been felt in nearly every industry imaginable, and particularly in the construction industry. It ran its course for 18 interminably long months, between 2007 and 2009; the worst period occurred at mid-year, 2009.

How did it affect the commercial construction industry and what has/will be happening nearly 5 years after the official “end” of the Great Recession?

What happened?

The construction industry is accustomed to cyclical changes but the Great Recession was hardly a typical downturn or cyclical change. No sector of the construction industry was spared from the harsh impact of the Great Recession; not residential, commercial, industrial, or heavy and civil engineering.

One aspect of the recession that is not often mentioned is that the cyclical boom of the construction industry was followed directly by the recession, leaving a large glut of residential and commercial real estate on the market.

As the recession deepened, homeowners were defaulting on their homes, others were not buying homes as they had planned, and investors were being extremely cautious in financing new construction projects.

2012 – 2013 was predicted to be a period of growth and non-residential construction activity was expected to continue its recovery. Once, again, there were recovery delays, fueled in part by government and financial institutions:

A federal budget sequester resulting in scaled back government spending.

A federal government shutdown.

Credit restrictions placed on construction projects, home loans, loans in general.

Increasing long-term interest rates based on expectation of the government reducing its stimulus program.

Those factors, and the extremely slow recovery of the world economy, certainly had a direct and negative influence on the construction industry.

Moving into 2015

So what is the state of commercial construction in 2014 and beyond? Recovery is happening, but not at an increased pace. Factors that (according to industry observers) influenced growth in 2014:

Weather-related delays on projects at the start of the year.

Ongoing sluggishness in the institutional market and lowered construction spending projections.

Financial institutions continued their restrictive lending practices.

Is there any good news? Yes! Let’s look at some of the more favorable changes in 2014 and some positive indicators going into 2015:

Some easing of lending restrictions; loans rose 4 percent in the second quarter of 2014, most of it related to the commercial real estate industry.

Commercial construction projects are rapidly increasing in several regions of the U.S., particularly in Texas (Houston) and the southern region in general, and New York (Rochester and New York City), Massachusetts (Boston), and Louisiana (New Orleans).

Consumers are “cautiously optimistic” and spending is up, as is the increase in jobs.

The commercial construction industry was, and continues to be deeply affected by the Great Recession. But industry watchers, like consumers, are cautiously optimistic (with more emphasis on cautious than optimistic) that the industry is slowly and steadily moving forward.

Australian Construction Industry Sees Substantial Growth

Construction Industry employment levels reach record levels in Australia

National employment figures for workers in the Australian construction industry, has dramatically increased by 28,200 in the three months to February 2014 to reach 1,037 million. This is the highest level recorded and an impressive 2.3 percent above previous records for the same time period last year, according to comprehensive labour force data presented by the Australian Bureau of Statistics.

New South Wales has been accredited with driving the escalation, and boasts 27,900 new construction workers amongst a robust rebound in housing figures and the continued improvement of commercial conditions with strong interest and increased investment in transport and roads.

Construction worker shortages remain a real concern

These latest job surges have again raised concerns with analysts’ of an impending shortage of tradespeople and other construction workers as building activity increases throughout Australia.

Slow construction activity in recent years has unavoidably led to decreased numbers of apprentices that have been trained and noticeable shortages of skilled construction workers.

Housing Industry Association Senior Economist Shane Garrett suggests that whilst supply and demand for tradespeople is generally considered steady, shortages emerging in trades like bricklaying, tiling and roofing coupled with an upward burden on wages and other associated construction costs will likely intensify as building activity with Australia recovers.

These recent statistics do rely on how rapidly current workers that are returning to construction jobs from resource projects can be up-skilled to work on housing and how speedily the industry can support the numbers of apprentices and other workers coming through.

In addition we can see from other statistics that an a national level, almost 65 percent of workers were employed in ‘construction services’ (666,800 people), 25 percent in building construction (261,200) and 8.4 percent (87,200) in heavy and civil engineering construction, of which around 911,500 men were employed compared with 125,900 women, denoting that men outnumber women in the construction industry by more than seven to one.

How can you benefit from recent growth in construction work around Australia?

With a growing need for workers to remain current and relevant, it will require an increased commitment by Registered Training Organisations (RTO’s) to provide the training for High Risk Work Licences.

Having met these challenges, many RTO’s are able to provide all that you need for the required training and assessment of High Risk work Licences and other construction based training.

When selecting to train for any High Risk Work Licence be certain to choose a reputable Registered Training Organisation (RTO) that is a recognised leader for their training and assessment outcomes. Elect to train with an RTO that has opted to provide smaller class sizes for High Risk Work Licences and who has taken the effort to provide the mandatory requirements for training and assessment. Choose quality over quantity and be sure to ask that the training you receive incorporates all Australian safety requirements, comprehensive lifting applications, installation and use of equipment, hazard recognition and risk control methods, as well as height safety methods all whilst maintaining regulatory compliance.

We would like to give credit to Andrew Heaton, Sourceable Industry News & Analysis and the Australian Bureau of Statistics for some source material.

A licence to perform High Risk Work (HRW) is required if you work with high risk equipment or plant. These high risk licences are valid in every Australian state and territory, enabling you to operate high risk equipment under consistent standards everywhere in Australia. Koolat Safety is a Registered Training Organisation (RTO) that provides quality training solutions for the Australian Construction Industry and the Australian Resources & Infrastructure sector and we are able to offer our clients a variety of affordable accredited training courses for all high risk work and construction short courses.