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.

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.

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.

The Three Highest Paid Jobs In The Construction Industry

If you’re planning to get into the construction industry and make it as your career path for good, it would be much better if you learn how this market works from understanding how the various players function in this industry. Construction industry is a multi-billion dollar industry, and there are a lot of opportunities for you to make a living out of it. However, the competition in this market is pretty fierce too, and if you want to stay for long and be successful, you have to make good profitable runs right from the very start.

There’s good money in this industry, but like in other multi-billion dollar industry in the world, fortune is not served in a silver platter, it is earned. Chances for profit and promotions can be really good, but only if you have the enough education and experience for the job.

People with good management skills and good knowledge in construction definitely have better chances for earning competitive pay cheques. The United States’ Bureau of Labour Statistics said in 2008 that, skilled workers in construction industry can earn as much as $22 per hour, while the professionals and those who work in the managerial department are expected to get around $39 per hour, now that’s quite a lot of difference, considering all the hard work those skilled workers do in the site. Also, the level of salary is practically affected by the location of the job, difficulty of the tasks and the benefits offered by constructions employers. This entry will talk about three (3) of the most high paying job in the construction market, read on and find out which where you will fit best in the future.

Construction Manager

Construction managers have the skills to organize his team, the plans, materials, tools and tasks for the whole construction project. They play a big role in the project, from the planning, supervising the workers, keeping in touch with the contractors, and ensure on-time delivery of the construction materials and machineries. The job responsibilities of a construction manager can be very demanding; which is the reason why construction companies choose to hire people with qualified bachelor’s degree. Also, before they get hired, construction companies demand for granted certificates from recognized construction management bodies for applicants for this position.

First-line Supervisor

First-line Supervisors manage the skilled workers for the project. Their task basically revolves around in reading the project plant, assigning people for the job, scheduling tasks to the workers, assess construction materials and coordinate with the construction manager. For this particular position, construction companies look for people with civil engineering or related degrees.

Electrician

Electricians are in charge of the design, repairs and replacements of the electrical lines and units in commercial and residential establishments. These are skilled professionals who can ensure safety and convenience for your electrical needs. People who wish to be in this type of job must undergo vocational education, accredited training from related course and considerable first-hand experience for the job.

Profitable Careers in the Construction Industry

There are tons of jobs on hand in the construction business that plays major importance in the industry, and many, if not most contractors turn to recruiting and staffing companies to fill the team for the projects.

With the rapid growth of construction industry, more and more private and government sectors invest in this market, and as a matter of fact, even public investment companies are joining in this market, making the industry so much bigger than before. The multi-billion dollar industry of construction is widely spread all over the world, covering suppliers, contractors, sub-contractors, producers, engineers, designers, installers and many more specialized professionals. Thus, the variety of jobs needed in construction speaks of how huge this market has become.

The trend of decomposing older establishments and reinstating new ones with modern designs is a global phenomenon in construction industry, and with every little innovation requires a lot of creative and professional personnel to get the job done. Here are ten of the hottest jobs available in construction business today:

1. Architects

These are the brains behind every design of the construction. They work and make the whole plan of the building for every detail of the design, from safety, sturdiness and aesthetics of the building. They are also amongst the highest paid professionals in the industry.

2. Civil Engineers

These professionals look more into the technical part of the construction. They implement those plans drawn out by the architects, thus they always work around and in close contact with the architect. Their job basically revolves more in the execution of the plans.

3. Building Services Engineers

This type of engineer works more in the essential amenities of the construction, such as installations. Their job is to provide the most cost-effective details in the interior aspects of the building, such as heating, electrical wirings, ventilation, lighting, lifts, public health, safety measures and devise, sanitation, fire protection, etc.

4. Building Surveyors

These professionals are often referred as the biggest enemies of builders and workers, as their job revolves in visiting and inspecting the construction site. They write their inspection reports, which is very important for the safety and quality of the building.

5. Electrical Engineers

The job of this kind of engineer is all about the electrical support of the building in before and after the construction.

6. Facilities Manager

This one probably is the most interesting career in construction industry. Facilities management involves both planning and implementing new facilities for the construction. Other job under their responsibilities includes upkeep and maintenance of the structure.

7. Quantity Surveyor

Their main job is to take care of all cost related to building, from sorting the initial costs to cost cutting tasks.

8. Manufacturers

Construction needs building materials, and with that, manufacturers play a very profitable big role in this business. However, this job requires a lot of investments too.

9. Suppliers

Builders don’t really deal directly to the manufacturers, as suppliers are there to act as a middleman for every transaction they want to make. They ask for the materials the builders will need, get them from the manufacturers, then sell it to the builders and earn commission on the process.

10. Contractors

These professionals take the contracts for buildings, and their job basically starts from pre-decided digits and finish with a fixed price. They’re involved right from the planning, purchasing of construction materials, down to the construction process.

Careers in the Building and Construction Industry

With the increasing numbers of people who are unemployed these days, people should start looking into careers in the different industries that they can get into. It is important that one is skilled, knowledgeable and well trained to be able to fit in with the type of industry they wish to be part of. In the building and construction industry, there are so many careers that a skilled person can get into. They just need to prove what they really can do so that they may be hired at the job position that they wish to be in.

One can become an architect in this industry. This is maybe the highest rated job position in the building and construction industry. This career will need one who has a degree in architecture. It is also important that they have trained well and is knowledgeable with the updated trends in architecture. This handles the designs of the construction. They make the entire plan of the building with its detailed designs and entirety of the building.

One may also become a civil engineer in this industry. This person will be working hand-in-hand with the architects. They are responsible in applying the plan of the construction. He or she will be executing the plan of the architect. There will also be the building services engineers who will be responsible in the amenities of the construction. All of the installations will be handled by this engineer. The different details of amenities will be planned by this person like the electrical wirings, safety measure, sanitation and a lot more.

One can also get into the manufacturing side of the construction. This is a very lucrative career to get into. This will be responsible with all of the materials needed in the construction of the building. However, one will need a good investment of money to be able to come up with this career.

One may also be a contractor. Many professionals in this industry are dealing with contractors for the building of the business. They will be coming up with an agreement regarding the materials, labor and construction procedures until they go down to a fixed price. This will take care of the laborers, manufacturers or suppliers and the number of days until the construction finishes.

There are still lots of careers that one may get into with this kind of industry. In fact, this is one of the largest industries that people may get careers from. It is also very lucrative as there will always be construction everywhere and you will not be left with any projects at all. As long as you know how to find those projects, you will definitely get a career to work on. There are also companies that take care of the building and construction of different establishments. You may apply for a job in these businesses as long as you know that you can handle the work.