Private companies in various construction subsectors growing
RALEIGH, N.C., May 14, 2013 — Sageworks, a financial information company, recently analyzed the financial performance of privately held companies in the strengthening construction sector and found that several subsectors have generated double-digit sales growth in the 12 months ended March 2013.
The Private Company Report
by Sageworks, a monthly update on the health of private companies in America, shows that general contractors, construction management firms and design/build firms tied to residential building (NAICS code 2361) are currently posting the strongest growth, generating a roughly 21 percent sales increase.
Nonresidential builders posted a 14.3 percent gain over the last 12 months. These categories are especially important because these companies tend to be involved in bigger, higher-dollar projects, and they are often key customers for suppliers and key employers for many of the other construction industries. Both are outpacing growth among privately held companies overall, too.
“The recession was a real-estate led recession, but around two years ago, construction companies started to see sales growth,” Sageworks Chairman Brian Hamilton said recently. “These companies are still early in the recovery process, and they may still be hesitant to add a ton of new jobs.”
The majority of U.S. construction companies are privately held, so their performance is critical to the overall industry and the economy. Thursday’s U.S. housing starts report will give the next government-generated glimpse into the housing market, but the National Association of Home Builders
expects single-family housing starts in 2013 to number 672,000, up 23 percent from 2012.
Of the other building-related categories tracked by Sageworks, professionals providing architectural, surveying and engineering services (NAICS 5413) have seen 15 percent growth. Specialty contractors – a category that includes grading, fencing and paving firms as well as those that install gutters and pools – have increased sales by 14.1 percent, Sageworks data shows.
Sageworks analyst Brad Schaefer noted that strong growth among residential construction builders is noteworthy, but cautioned that this part of the sector was among the first to face sales declines and faced the steepest drops during 2008 and 2009. While some categories, including architectural services and utility construction, experienced a rebound in sales
in 2010 and 2011, the categories including general contractors and homebuilders were flat to negative during those periods.
“They had the most to catch up from, so just because their sales are growing the most now doesn’t mean they’re much better off than they were in 2009,” Schaefer said.
In addition to benefiting from stronger new home sales, general contractors might also be seeing more confident homeowners who are now more likely to start a major renovation project that they were a few years ago, he added. Sageworks’ data doesn’t separate construction companies by whether they concentrate on new homes or renovations.
But new construction and increased sales of existing homes will be important to the sector’s recovery, because remodeling
doesn’t historically generate nearly the kind of economic contribution that housing turnover does. The typical buyer of a new or existing single-family home spends about twice as much on property alterations and repairs in the first year after buying than does a homeowner who isn’t planning on moving, according to a previous study by the NAHB.
“It seems like we’re seeing positive trends over the past two years,” Schaefer said. “Will we see a higher increase than what we saw last year? Maybe not, but it seems that with the economy improving and unemployment decreasing, it looks positive for the construction industry as a whole.”
That’s not to say improvements won’t come without difficulties, Schaefer said. He noted there have been some reports of areas facing a shortage of skilled labor willing to work at current wages. “Getting resources and raw materials at efficient prices
and so forth could remain a challenge,” he added.
About the Data
Sageworks possesses a proprietary database of privately held company financial statements aggregated by industry. Sageworks aggregates private-company financial statements from accounting firms, banks, and credit untions through a cooperative data model with their clients. The data is segmented and can be queried by 1,400 industry codes, 70 financial metrics, company size, and geographic location.
Raleigh, N.C.-based Sageworks is a financial information company. Sageworks’ data and applications are used by thousands of accounting firms and banks across North America. The company has been named to the Inc. 500 list of the fastest growing privately held companies in the U.S. and to the Deloitte Technology Fast 500.
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