NSCA members continuously ask us about market conditions and trends. As a result, we’ve been following and reporting on industry conditions for over 20 years. The one thing we know for sure is this: New construction is the overall best indicator of the future business climate.
We’ve been able to predict the patterns of slowdowns, recoveries, and market and geographic changes that have occurred with great success. It’s pretty simple, really – constructing and renovating commercial buildings leads to new systems sales.
Our expertise and accuracy are centered on lead and lag indicators. We analyze the projects that are in discussion, budget, and design phases as our lead indicators, and then we compare that information with what we have learned about how our work lags the various timeframes. The trick is having the history and experience to understand the revenue recognition cycles within the systems integration space.
In our Electronic Systems Outlook Summer 2017 report, we note that the numbers look solid for integrators. We predict that the infrastructure spending bill will have a tremendous impact on the industry. Also worth noting in this edition of the report: Canada will experience a strong rebound from some pretty tough years.
Overall, according to our Electronic Systems Outlook Summer 2017 report, integrators can expect a very healthy marketplace and business climate. As usual, however, the challenge won’t be in finding the work – it will be finding people to perform the work. NSCA is addressing this issue through several outreach efforts.
Our forecast for 2017 construction-put-in-place totals calls for an increase of 6%. With GDP most recently reporting 2.1% growth in the fourth quarter of 2016, construction growth of 6% looks solid. Although this is a drop from the hot pace of growth from 2013 through 2015, it seems to indicate that the recovery bounce is over and more normal growth is in store for the next few years.
Lodging is one of those areas that experienced a post-recession sharp recovery. We expect that the peak has been reached in this cycle, and slower growth is in store until vacancy rates improve again. Still, 2017 will be a good year for lodging construction, with 6% growth. Office construction has followed a similar recovery pattern, and we expect it to slow to 9% growth in 2017. Commercial construction is forecast to lead 2017 at 10% growth, but to slow in later years throughout our forecast horizon of 2021.
National unemployment remains below 5%. There are some signs of inflation – at least enough for the Fed to raise interest rates a bit, but nothing like high inflation. Sports teams are building new arenas and (in some cases) angering fans as they move to new cities. Consumers are spending and buying new homes. The economy is humming along in good shape right now, not to paint too rosy a picture.
In terms of the immediate outlook for the construction industry, a big problem remains: finding enough of the right people to get the work done.
Download the Electronic Systems Outlook Summer 2017 report now – free for Gold and Platinum NSCA members, and available for purchase at $199 for Bronze and Silver members. If you’re an integrator, but not an NSCA member, you can join for $595 and receive a free copy of the report. Join now!