IBISWorld Industry Report 23621 Industrial Building

WWW.IBISWORLD.COM Industrial Building Construction in the US August 2019 1

IBISWorld Industry Report 23621Industrial Building Construction in the USAugust 2019 John Madigan

Forge on: The industry is expected to decelerate due to the weakening of US manufacturing

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance4 Executive Summary

4 Key External Drivers

6 Current Performance

8 Industry Outlook

10 Industry Life Cycle

12 Products and Markets12 Supply Chain

12 Products and Services

14 Demand Determinants

14 Major Markets

16 International Trade

17 Business Locations

19 Competitive Landscape19 Market Share Concentration

19 Key Success Factors

19 Cost Structure Benchmarks

21 Basis of Competition

22 Barriers to Entry

23 Industry Globalization

24 Major Companies24 Jacobs Engineering Group Inc.

24 Fluor Corporation

25 AECOM

27 Operating Conditions27 Capital Intensity

28 Technology and Systems

28 Revenue Volatility

29 Regulation and Policy

30 Industry Assistance

31 Key Statistics31 Industry Data

31 Annual Change

31 Key Ratios

32 Industry Financial Ratios

33 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


The industry is composed of contractors that are primarily responsible for the construction (e.g. new work, additions, alterations, maintenance and repairs) of

industrial and manufacturing buildings. Establishments include general contractors, design-build companies and construction management operators.

The primary activities of this industry are

Constructing new manufacturing and industrial buildings

Performing alterations, additions or repairs to manufacturing and industrial buildings

Constructing waste and garbage disposal plants

Constructing factories, plants and mills

Constructing industrial laboratories and testing facilities

23799 Heavy Engineering Construction in the USThis industry primarily constructs heavy nonbuilding industrial structures, such as nuclear power plants and refineries.

23816 Roofing Contractors in the USThis industry performs specialized construction work on manufacturing and industrial buildings on a subcontractor basis.

23812 Steel Framing in the USThis industry performs specialized construction work on manufacturing and industrial buildings on a subcontractor basis.

23622a Commercial Building Construction in the USThis industry primarily constructs commercial buildings, including offices and retail stores.

23622b Municipal Building Construction in the USThis industry primarily constructs institutional buildings.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

enr.construction.com Engineering News Record

www.agc.org The Associated General Contractors of America

www.census.gov US Census

The major products and services in this industry are

Construction management services

General contracting

Renovations

Specialty services

Other nonbuilding construction services


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SOURCE: WWW.IBISWORLD.COM

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Revenue vs. employment growth

Products and services segmentation (2019)

51.1%General contracting

22.1%Construction management services

13.6%Renovations

8.5%Other nonbuilding construction services

4.7%Specialty services

Key Statistics Snapshot

Industry at a GlanceIndustrial Building Construction in 2019

Industry Structure Life Cycle Stage Mature

Revenue Volatility High

Capital Intensity Low

Industry Assistance Low

Concentration Level Low

Regulation Level Medium

Technology Change Medium

Barriers to Entry Medium

Industry Globalization Low

Competition Level High

Revenue

$46.3bnProfit

$2.3bnWages

$6.6bnBusinesses

3,089

Annual Growth 19–24

1.7%Annual Growth 14–19

4.9%

Key External DriversManufacturing capacity utilizationPrivate investment in manufacturing structuresGovernment consumption and investmentTrade-weighted indexYield on 10-year Treasury note

Market ShareThere are no major players in this industry

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FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31



Key External Drivers Manufacturing capacity utilizationManufacturing capacity utilization measures the availability of existing US manufacturing space. It is determined by the ratio of actual manufacturing output to potential full capacity output. As the rate rises, the availability of existing US manufacturing space falls. As a result, demand for industrial and manufacturing building construction increases because

manufacturers need more space to expand production. Manufacturing capacity utilization is expected to increase in 2019.

Private investment in manufacturing structuresPrivate investment in manufacturing structures includes new work, additions, alterations, maintenance and repairs.

Executive Summary The Industrial Building Construction industry constructs, remodels and maintains factories, assembly plants and mineral-processing mills. The health of the US Manufacturing sector (IBISWorld report 31-33) primarily determines industry growth since most of its projects are related to the production and distribution of goods. Over the five years to 2019, industry revenue grew a strong annualized 4.9% to $46.3 billion. Additionally, revenue is projected to grow 2.1% in 2019 as industrial production and consumer spending rise in line with growth in government spending and

declines in the yield on the 10-year Treasury note. All of these factors denote strong industry performance during the five-year period.

The industry started the period with overall revenue growth of 25.9% in 2015 as a result of a 33.8% increase in private investment in manufacturing structures. During the middle of the period, private investment in manufacturing structures waned, causing declines in industry revenue in 2016 and 2017. Overall, industry revenue will most closely track with movements in manufacturing capacity utilization and private investment in manufacturing structures.

Over the next five years, growth in private investment into manufacturing structures is expected to be more consistent, benefiting the industry. As a result of rising demand and higher investment, industry profit, measured as earnings before interest and taxes, is expected to reach 5.0% of industry revenue in 2019, up from 4.3% in 2014.

Over the five years to 2024, IBISWorld expects industry revenue to grow an annualized 1.7% to $50.5 billion. A strong US economy is expected to continue fueling demand for manufacturing structures. A projected weakening in the dollar is expected to spur increased manufacturing activity, with the industrial production index anticipated to rise an annualized 0.7% during the five-year period. However, the industry is expected to decelerate as a result of a comparative weakening of US manufacturing capacity utilization. Moreover, high interest rates and further increases in the yield on the 10-year Treasury note will increase borrowing costs, which may prevent some manufacturers from expanding, limiting the rate of expansion in industry revenue. However, sustained consumer spending and private investment in manufacturing structures are anticipated to outweigh the negative effects of rising borrowing costs and slackening demand. As a result, the industry is expected to continue growing over the next five years, albeit at a slower pace.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

The industry is expected to continue expanding over the next five years


Industry Performance

Key External Driverscontinued

Private investment depends on the need for new space, which is determined by exporting trends, utilization rates and economic cycles. Interest rates, property values and lending standards also influence private investment, as loans and bonds finance most new developments and renovations. Private investment in manufacturing structures is expected to increase in 2019, presenting a potential opportunity for the industry.

Government consumption and investmentGovernment consumption and investment measures the total value of services provided by federal, state and local governments (e.g. education and national defense) and investment in fixed assets (e.g. construction and software). As government consumption and investment increase, private market activity is crowded out, harming industry revenue growth. In 2019, government consumption and investment is expected to rise.

Trade-weighted indexThe trade-weighted index (TWI) measures the strength of the US dollar against the currencies of its trading partners. A drop in the index reflects the depreciation of the US dollar, increasing foreign demand for US goods. Demand for industry construction services also increases when the TWI falls, as manufacturers and industrial companies build new plants or renovate existing spaces to boost production. The trade-weighted index is expected to rise in 2019, posing a potential threat to the industry.

Yield on 10-year Treasury noteMost property purchases, developments and construction activities in the industry are financed by mortgages or bonds, which are related to the yield on 10-year Treasury bonds. Low rates decrease the cost of borrowing money to finance construction and typically benefit the industry. The yield on a 10-year Treasury note is expected to fall in 2019.

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Current Performance

Over the five years to 2019, the Industrial Building Construction industry is expected to grow an annualized 4.9% to $46.3 billion, including projected growth of 2.1% in 2019 alone. During this period, the industry’s key downstream markets, including US semiconductor, automobile and transportation manufacturers, increased operations to keep pace with growing consumer demand both domestically and abroad. To produce and ship their products more efficiently, many manufacturers employed industry operators to build new manufacturing facilities or retrofit existing structures with state-of-the-art technologies. Early during the period, near-zero interest rates further spurred new industrial building construction as the cost of borrowing to finance such projects remained negligible. However, the Federal Reserve has been incrementally raising interest rates throughout the current period and plans to continue doing so for the foreseeable future, which has served to increase borrowing costs to more prohibitive levels in more recent years, slowing the industry’s downstream expansion. Industry growth has been fueled by an annualized 1.1% increase in the industrial production index, which measures the output of the US mining,

manufacturing, electric and gas industries. However, despite the industry’s expansion over the past five years, marginal growth in private investment in manufacturing structures, which has risen an annualized 0.3%, has softened the expansion of industry revenue. However, declines in this activity were mostly recorded during the middle of the period, while both industry revenue and private investment in manufacturing structures are expected to grow 2.1% in 2019. Overall, this investment activity has been volatile, peaking in 2015 and reaching its lowest point in 2018.

Revenue volatility and profit

While industry revenue increased over the five years to 2019, year-over-year growth was volatile. Industry revenue will track most closely to movements in private investment in manufacturing structures, which increased sharply in 2015 and then declined throughout most of the five-year period. Most recently, industry revenue fell 3.7% in 2017 partially due to a 15.1% decline in private investment in manufacturing structures. As a result, in 2017, the value of manufacturing construction fell 11.8%, though remains up for the period, rising an annualized 5.0%.

Over the past five years, industry operators safeguarded profit despite fluctuating demand by relying on subcontractors for construction projects when possible, rather than hiring full-time workers. Typically, subcontractors are paid only until a particular project is completed, which reduces an operator’s overall annual payroll. Over the five years to 2019, total industry employment is expected to grow an annualized 2.5% to 93,121 workers. However, the industry’s reliance on subcontractors has kept overhead and employment costs from ballooning during the five-year period. As

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Revenue volatility and profitcontinued

a result, total wage expenditure is projected to have fallen from 16.2% of industry revenue in 2014 to 14.2% in 2019. Additionally, those operators that pushed through lackluster conditions at the beginning of this five-year period reaped the rewards of plummeting input costs. In particular, the decline in the world price of crude oil benefited the industry, as its services require a substantial amount of fuel to power machinery used in large-scaled construction projects. Over the five years to 2019, IBISWorld expects the world price of crude oil to fall an annualized 7.0%. As a result, the average

industry profit margin, measured as earnings before interest and taxes, is expected to account for 5.0% of revenue in 2019, up from 4.3% in 2014. However, the cost of certain building materials such as composite wood and lumber, as well as cement, has increased over the five years to 2019, which has prevented industry profitability from expanding more aggressively. Conversely, strong demand conditions and rising profitability have increased industry participation, with the number of industry establishments increasing 0.9% to reach 3,315 establishments.

Hurdles remain Over the past few years, building construction in a few niche markets, including chemical, semiconductor, petroleum and automobilemanufacturing, has driven industry growth. At the same time, the strength of these downstream markets masks several long-term negative trends. Manufacturers, industrial operators and other producers continue to outsource production activity to emerging economies with less-expensive production costs, such as China, India and South Korea. As a result, US capacity utilization has not yet reached its peak percentages from the 1980s, when, according to the Federal Reserve, capacity topped out at 83.8% in 1988. However, manufacturing capacity utilization has increased at a marginal annualized rate of 0.6% over the past five years due to new technological developments in

telecommunications-related industries and increased demand from automobile-related industries. In addition, technological improvements, tax-incentive programs and a lower number of high-skilled workers in developing countries have attracted certain manufacturers back to the United States. According to a 2015 study conducted by the Boston Consulting Group, an estimated 60.0% of company executives that operate plants in Asia for US consumption, with sales in excess of $1.0 billion or more, are considering reshoring their operations.

Building construction in a few niche markets has driven industry growth



Industry Outlook

Several factors, including the pace of economic expansion, export activity, cost of financing and technological advances will influence the Industrial Building Construction industry’s performance over the next five years to 2024. While the Federal Reserve is expected to loosen monetary policy, interest rates are expected to remain below prohibitive levels, but still-high borrowing costs will slow industry activity to an extent. Additionally, it is expected that US manufacturing capacity utilization will decelerate, causing demand for industry products and services to also slow down. However, investment in manufacturing

structures is anticipated to rise an annualized 2.4%. This disparity demonstrates that industry operators are expected to reduce capacity utilization in the short term, while increasing long-term investment to expand future production.

Industry activity is anticipated to also be supported by steady growth in the industrial production index and a comparatively weaker dollar, which will facilitate growth of exports and incentivize greater downstream production. Nevertheless, IBISWorld projects that industry revenue will grow at a slower annualized rate of 1.7% to $50.5 billion.

Higher demand Rising exports are expected to facilitate industry growth by encouraging downstream manufactures to increase production and expand manufacturing facilities. On the domestic side, manufacturing capacity utilization is anticipated to decelerate, increasing an annualized 0.2% over the next five years, which will support industry growth, but to a lesser degree than it did during the current five-year period. Along these lines, consumer spending is anticipated to increase an annualized 1.8% during the five-year period, which is a deceleration from the 2.8% annualized growth exhibited during the previous period. As demand for consumer products increases, manufacturing companies will seek to expand production to cater to an increasing consumer appetite.

Increased demand from key downstream markets is also expected to bolster industry performance over the next five years. The main sectors that are expected to contribute to demand for industry services are pharmaceutical manufacturing, chemical manufacturing and plastics and plastic product manufacturing. For example, as more Americans gain health insurance under

the 2010 Patient Protection and Affordable Care Act (PPACA), pharmaceutical companies are expected to boost production of popular medicines to keep pace with rising demand. Similarly, rising per capita disposable incomes will boost demand for consumer goods, many of which are made of plastic. Together, these factors are expected to provide ample demand for the industry, despite a softening in domestic manufacturing expansion. The green technology market is also expected to contribute to demand for industry services over the next five years. The push for sustainable products, such as solar panels and wind turbines, will likely drive up demand for new manufacturing facilities, while rising investment in sustainable operations may lead to major renovations and expansions of existing industrial buildings. Furthermore, lower

Increased demand from key downstream markets is expected to bolster industry performance



Industry structure Over the five years to 2024, the number of industry employees is expected to increase an annualized 1.8% to 101,591 workers. By 2024, IBISWorld expects wages to account for 14.2% of total revenue, holding steady near current levels. However, this stasis is not expected to continue indefinitely. While the industry may easily substitute in-house laborers for subcontractors, it will be limited in outsourcing work by administrative support staff and skilled employees, such as secretaries, engineers and project managers, which is likely to push industry wage costs upward.

Like much of the Construction sector (IBISWorld report 23), industry participants often compete on price, quality and reputation. Since most operators offer similar services, price is especially important. Additionally, robust

activity across all construction markets continues to put upward pressure on the price of key inputs. Consequently, dramatic increases in industry profitability will not likely occur over the next five years, despite improvements in revenue. Over the five years to 2024, industry profit, measured as earnings before interest and taxes, is expected to increase slightly to 5.1% in 2024. At the same time, stable profit and demand are expected to attract new entrants into the industry. IBISWorld expects the number of industry enterprises to grow an annualized 1.1% to 3,261 companies by 2024.

value-added markets, such as wood, paper and furniture manufacturing, will likely shift to southern US states, where manufacturing less-complex products is

more affordable. However, fierce competition for manufacturing jobs from Mexico remains and could still hinder industry growth.

Higher demand continued

Industry participants often compete on price, quality and reputation


Industry PerformanceThe industry is not subject to high technological change

IVA is expected to grow faster than the overall economy over the 10 years to 2024

The industry has benefited from increased demand from growing industries

Life Cycle Stage



Industry Life Cycle The Industrial Building Construction industry is in the mature phase of its life cycle, indicated by moderate technological change and full market acceptance of its services. Over the 10 years to 2024, the industry’s contribution to the overall economy (industry value added or IVA) is expected to increase at an annualized rate of 2.7%. The US economy is expected to grow an annualized 2.0% during the same period. The industry is heavily dependent on private investment into manufacturing facilities; therefore, the limited reshoring

of manufacturing production back to the United States, particularly to the South, has supported industry revenue growth during this period. While other construction industries have routinely grown much faster than the overall economy in recent years, the industry’s heavy reliance on manufacturing has held it back from achieving greater IVA growth. Overall, this industry’s higher-than-average IVA growth can be attributed to rising wages and profitability, which are key components in the calculation of this statistic.

This industry is Mature


Products and Services The Industrial Building Construction industry’s principal activity is to provide contracting services such as new work, additions, alterations, maintenance and repairs for industrial and manufacturing facilities. More than 90.0% of industry revenue is generated from operators that act as the primary contractors on assigned projects.

General contractingIn 2019, general contracting is expected to account for 51.1% of industry revenue.

General contracting income is earned by participants that operate as “prime” general contractors on the construction of a project given by its clients. Typically, construction companies obtain contracts through tendering or quoting a price accepted by the property developer. Contracts normally require the general contractor to oversee all aspects of the project, from quantity surveying, material purchase, skilled labor and subcontractor recruitment and construction to the lockup stage. The

Products & MarketsSupply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

21 Mining in the US This industry uses industrial builders to construct mineral and energy processing facilities adjacent to mine sites or transport terminals (e.g. smelters).

31-33 Manufacturing in the US This industry uses industrial builders to construct manufacturing and industrial buildings. Industries such as chemical products, food products and transport equipment products are major demand drivers.

53112 Commercial Leasing in the US This industry uses industrial builders to construct and repair manufacturing and industrial premises for lease, including industrial estates and technology parks.

92 Public Administration in the US This industry uses industrial builders to construct buildings, such as military installations, laboratories and waste disposal facilities for federal, state and local government agencies.

KEY SELLING INDUSTRIES

23 Construction in the US This industry provides subcontracted special-trade construction services.

32732 Ready-Mix Concrete Manufacturing in the US This industry supplies construction material inputs for manufacturing and industrial buildings.

32733 Concrete Pipe & Block Manufacturing in the US This industry supplies construction material inputs for manufacturing and industrial buildings.

42331 Lumber Wholesaling in the US This industry supplies timber-building products, principally hardwood, for framework and concrete formwork.

42333 Roofing, Siding & Insulation Wholesaling in the US This industry supplies construction materials used for cladding and insulating buildings (e.g. thermal and acoustical fiberglass insulation products, asphalt roofing and vinyl siding).

42381 Construction & Mining Equipment Wholesaling in the US This industry supplies construction equipment inputs for manufacturing and industrial buildings.

53241 Heavy Equipment Rental in the US This industry provides construction and transportation equipment for lease.

Supply Chain


Products & Markets

Products and Servicescontinued

general contractor is expected to consult with project architects, financial providers and building regulators.

Most general contracting is associated with construction of buildings on land owned by others, but there is a growing tendency for operators to partly or fully finance property developments. Throughout the past decade, building operators have increasingly taken an equity interest in large-scale property developments to increase profit and improve cash flow. Consequently, this segment is expected to grow as a portion of total revenue over the five years to 2019.

Construction management servicesConstruction management is anticipated to account for 22.1% of total industry revenue in 2019. These services include many of the same elements performed by the general contractor. However, contrary to general contractors, construction managers do not participate in construction activities; instead, all the work is done by subcontractors.

Similar to general contractors, operators that supply construction management services oversee all aspects of the projects; this includes quantity surveying, purchasing material, hiring

skilled labor and subcontractors and construction up to the lock-up stage. The construction manager consults with the project architects, financial providers and building regulators. This segment has increased over the past five years in line with demand for manufacturing facilities.

RenovationsIn 2019, renovation contracts are estimated to account for 13.6% of industry revenue. Most remodels are requested when a manufacturer or industrial company develops a new product that requires an existing structure to be altered for production to take place. Renovations also include the expansion of existing buildings or plants; expansions take place when companies need to increase production to meet additional demand. Demand for renovations, retrofits and expansions has risen over the past few years as downstream manufacturers have sought to make operations more flexible, energy efficient and environmentally friendly.

Other activitiesThe industry generates 8.5% of its revenue from nonbuilding construction activities, such as land clearing and sewer installations. Specialty trades, such as

Products and services segmentation (2019)

Total $46.3bn

51.1%General contracting

22.1%Construction management services

13.6%Renovations

8.5%Other nonbuilding construction services

4.7%Specialty services



Products & Markets

Major Markets The Industrial Building Construction industry is primarily responsible for the construction (e.g. new work, additions, alterations, maintenance and repairs) of industrial and manufacturing buildings. The main sources of industry revenue are from facilities used to support transportation networks and those used in the manufacturing of a diverse basket of goods. This section focuses primarily on the largest subgroups in the transportation and manufacturing market segments.

Pharmaceutical manufacturingPharmaceutical manufacturing, (IBISWorld reports 32541a and 32541b)

is the industry’s largest source of downstream demand, composing 32.9% of industry revenue. This market segment includes production laboratories, research and development facilities, pharmaceutical plants, ingredient production facilities and secondary pharmaceutical manufacturing facilities. Both generic and brand name US pharmaceutical manufacturers are expected to have experienced significant boost in demand following the implementation of healthcare reform. Consequently, this market segment’s portion of total revenue has grown over the five years to 2019. Heightened demand for the construction of industrial

Demand Determinants

Demand for the Industrial Building Construction industry depends on the health of the US Manufacturing sector (IBISWorld report 31-33); most industry-specific construction projects are plants and buildings used to produce and distribute manufactured goods. Demand for the construction of specific industrial buildings (e.g. chemical manufacturing buildings or printing houses) is determined by industry-specific growth factors (e.g. exports of processed goods) and general trends in business investment and economic growth. In addition to business expansions, growth is influenced by interest rates, property values and lending standards. Loans and bonds finance most new developments and renovations.

Changes in production technologies and industry decentralization also influence demand. These changes affect manufacturing capacity utilization, which measures the availability of existing US

manufacturing space. As the rate of demand increases, the availability of existing US manufacturing space naturally reflects similar increases. As a result, demand for industrial and manufacturing building construction increases as manufacturers demand more space to expand its operations. Manufacturers will demand more space to expand when levels of consumer spending rise and downstream retailers place larger orders, necessitating higher production.

Indirectly, state and local mandates could ultimately affect demand through applied zoning and effluent control regulations. Industrial plant construction assignments could be stalled or shut down if the project does not meet certain requirements. Regulations could include high pollution levels during production, worker unionization rights and other Occupational Safety and Health Administration rules.

Products and Servicescontinued

architectural and engineering services, account for 4.7% of industry revenue. This segment has declined in recent years

as general contractors continue to integrate the entire planning and building process.


Products & Markets

Major Marketscontinued

buildings from this market segment is expected to occur over the next five years.

Chemical manufacturingFollowing closely behind pharmaceutical manufacturing, chemical manufacturing is expected to account for 28.0% of industry revenue in 2019. The rise in market share has been driven by rapid growth over the past five years, as the domestic production of chemical products has steadily increased. Demand for these products, which include a broad scope of chemicals, is influenced by the level of activity in the greater Manufacturing sector (IBISWorld report 31-33) and in the overall level of consumer spending. These products are vital to a wide variety of industries, including construction, motor vehicles, paper, electronics, transportation and agriculture.

Plastics and plastic product manufacturingThis segment includes businesses that produce both raw plastic and resin and those that make plastic products. These include manufacturers of thermosetting resins, thermoplastic resins and synthetic rubber and homeware, building materials and motor vehicle parts made from

plastic. Together, this business segment is expected to generate 25.0% of total revenue in 2019. Given the crucial importance of plastic for the production of consumer goods, manufactures in this segment have experienced a steady rise in demand for their products as per capita disposable incomes and, by extension, consumer spending has increased. Despite this increase, the total number of plastic and plastic product manufacturing structures is expected to remain nearly unchanged during the current five-year period. This stagnation is because increased demand has been met by increased productivity at existing plants that remained idle amid weak economic growth early in the period. As a result, this segment is expected to decline marginally as a portion of total revenue.

Transportation facilitiesStructures used in the support of transportation activities, such as passenger terminals for airplane, bus or ferries and subway stations, together are projected to generate a combined 14.1% of total revenue in 2019. This segment has declined over the past five years, as spending on transportation by all levels of government, but particularly on the federal level, have led to a lull in major

Major market segmentation (2019)

Total $46.3bn

32.9%Pharmaceutical manufacturing

1.1%Water transport

28.0%Chemical manufacturing

0.6%Other

25.0%Plastics and plastic

product manufacturing

8.1%Mass transit 4.3%

Aviation



Products & Markets

International Trade This industry is composed of companies that construct industrial facilities and other structures within the United States. Consequently, there is no international trade within this industry since goods are not passed from one country to another. However,

some large operators have foreign-owned parent companies, and many operate subsidiaries as well as offices abroad. For more information on international operations, refer to the Industry Globalization section of this report.

Major Marketscontinued

transportation projects. According to the Congressional Budget Office (CBO), the largest share of decline in transportation spending stems from an ongoing reduction in capital purchases, which includes facilities described in this

section, since 2003. Given this extended trend, IBISWorld projects this segment to continue shrinking moving forward, barring any large transportation investment undertaken by state legislatures or Congress.


Products & Markets

Business Locations 2019

MO1.5

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT0.2

MA1.4

RI0.2

NJ2.7

DE0.1

NH0.3

CT0.5

MD0.8

DC0.0

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ1.3

CA11.1

NV0.4

OR1.4

WA1.9

MT0.2

NE0.6

MN1.9

IA1.2

OH3.7 VA

1.8

FL9.7

KS1.1

CO1.5

UT1.3

ID0.9

TX8.9

OK0.6

NC2.4

AK0.5

WY0.2

TN1.7

KY1.7

GA3.7

IL5.0

ME0.2

ND0.2

WI1.6 MI

4.0 PA5.2

WV0.5

SD0.1

NM0.7

AR1.2

MS0.8

AL2.2

SC1.5

LA1.8

HI0.1

IN3.2

NY4.3 5

67

8

321

4

9


Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes


Products & Markets

Business Locations The Industrial Building Construction industry’s client base includes manufacturers that operate in a variety of industries, including retail, pharmaceuticals, food and automotive parts. The distribution of industry activity in the United States largely reflects the distribution of the population and economic activity. For example, the Great Lakes region accounts for the second-largest percentage of participants, with 17.5% of total industry establishments. This region contains most US vehicle manufacturers and factories. Employment is distributed similarly to establishments, with variations related to factory size because larger factories contain more workers.

The Southeast region accounts for the largest percentage of industry participants, with 29.2% of establishments. Over the past decade, high-tech manufacturing plants have begun to return to the South. Well-known names across the spectrum of manufacturing, such as BMW, Caterpillar Inc. and the Boeing Company, have expanded their presence in the region. High-tech manufacturing companies require high-skilled labor, which is typically scarce in countries with lower labor costs. However, compared with other parts of the United States and the developed world, the cost of living is relatively inexpensive in the South. These two factors have made the region a popular destination for manufacturers. With increased downstream demand from Southern manufacturers, the industry has grown more concentrated in the region over the past five years.

The West accounts for 15.4% of industry establishments, with California accounting for 11.1% of all industry establishments. The Mid-Atlantic region, which includes New York (4.3%), Pennsylvania (5.2%) and New Jersey (2.7%), accounts for 13.0% of industry establishments. This reflects the importance of service-based industries within this region in comparison with manufacturing. The Southwest region accounts for 11.5% of total industry establishments. No other region accounts for more than 10.0% of industry activity. As for the remainder of industry establishments,the Plains region accounts for 6.6% of industry establishments, while the Rocky Mountains region accounts for 4.1%. Lastly, New England accounts for 2.8% of establishments.

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Distribution of establishments vs. population



Cost Structure Benchmarks

The Industrial Building Construction industry is characterized by small- to medium-sized general contractors. Larger companies use subcontractors and other temporary employees on a per-project basis, enabling them to maintain operational flexibility. The industry is not capital intensive because the most expensive equipment, such as cranes and earthmoving vehicles, are leased on an ad hoc basis. As a result, the industry has a low level of overhead and capital intensity. Though industrial building construction is labor intensive, industry operators are able

to keep wage costs from ballooning, as they rely heavily on third-party subcontractors. WagesThe Industrial Building Construction industry is extremely labor intensive, though total wage costs account for just 14.2% of revenue in 2019, down from 16.2% in 2014 because operators make liberal use of third-party subcontractors where possible. Subcontractors are used for most of the development activity and are generally categorized by specialties, such as concreting contractors, structural steel

Key Success Factors Ability to expand and curtail operations rapidly in line with market demandThe ability to expand and contract employment in line with demand is essential for operators to maintain profit margins and compete with other operators for future projects.

Ability to negotiate successfully with regulatorConstruction managers must be able to understand local regulatory environments to ensure that developments are built to code.

Access to high quality inputsSuccessful operators establish good working relationships with suppliers of

high-quality construction materials and fixtures.

Must comply with government regulationsContractors must establish a record of compliance with government regulators and the Internal Code Council’s building codes.

Ability to alter goods and services produced in favor of market conditionsThe capacity to generate contracts in a variety of building markets can assist companies in stabilizing cash flow, particularly during periods of weak economic growth.

Market Share Concentration

The Industrial Building Construction industry has a low level of market share concentration, with the top three companies holding a combined share of 10.7% of industry revenue. The largest players are multinational general contractors with the resources and staff to handle massive contracts for industrial facilities like automotive manufacturing plants. However, most participants in the industry are small-scale general

contractors that serve a specific sector and local geographic region. Only 4.1% of establishments employ at least 100 people, while 81.3% of enterprises employ fewer than 20 employees. For the largest industry operators, the prevailing model is to subcontract small and midsize operators only when necessary. As a result, IBISWorld expects industry concentration to remain low over the five years to 2024.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive Landscape

Cost Structure Benchmarkscontinued

erectors, plumbers, electrical contractors and crane operators. Given that subcontractors are typically paid on a per-project basis, they are not kept on an operator’s book for an entire year. Consequently, they are not afforded the same benefits available to full-time employees, making them an attractive source of short-term labor. Given growing pressure for industry operators to cut unnecessary costs, subcontractors grew more popular over the past five years.

PurchasesOn larger-scale projects, the prime contractor maintains direct responsibility for most material purchases and negotiates directly with suppliers for discounted prices. On smaller-scale projects, subcontractors are typically responsible for completing discrete segments of construction, including the supply of materials. In total, purchase costs account

for an estimated 61.0% of total revenue in 2019 and are nearly evenly split between the cost of materials and the cost of third-party contractors. Purchases have remained at the same level during the period, though 2019 represents an increase from levels recorded in 2014.

ProfitIndustry profit, measured as earnings before interest and taxes, is expected to account for 5.0% of industry revenue in 2019, up from 4.3% in 2014. The industry has been able to maintain profitability due to its efficient use of subcontracting and leasing equipment, keeping operating costs low. Additionally, low fixed costs enable participants to increase and decrease expenses rapidly; most employees and capital costs are incurred with demand for new projects. The industry’s profit margin has increased since 2014 due to an increase in demand for contractors, developers and

Sector vs. Industry Costs

n Profi tn Wagesn Purchasesn Depreciationn Marketingn Rent & Utilitiesn Other

Average Costs of all Industries in sector (2019)

Industry Costs (2019)

0

20

40

60

Perc

enta

ge o

f rev

enue

80

100


8.4 5.0

17.11.4 0.70.6

61.0

14.2

17.62.3 1.01.5

47.1

22.1



Basis of Competition Industrial contractors typically compete on the basis of price, quality of service, technical capacity and efficiency. Of the aforementioned competitive factors, price is the most important due to industry competition for smaller-scale projects and publicly funded developments. These have especially been the case over the past five years.

Large-scale construction projects are typically awarded though a bidding process, known as a tender. Under this structure, a potential customer seeks industrial contractors to bid on a particular construction project. Tenders are conducted publicly or privately depending on the customer. Under a public tender, industrial contractors are

solicited through the media or government publications; closed tenders occur when a client invites a select few contractors to quote a project. The selection of contractors for a closed tender is based on reputation (past performance) and close relationships with developers and financiers. Tendering on extremely large or complex construction projects is confined to a few large-scale players.

Typically, small- to medium-size building contractors confine their activities to a localized region or sector. Several builders have been able to establish solid reputations in narrow market segments. Small-scale operators rely on word-of-mouth referrals to obtain

Cost Structure Benchmarkscontinued

remodelers. Over the five years to 2019, industry profitability has also been aided by a declining ratio of wages as a share of revenue and declining input costs, such as that of steel. However, industry margin expansion has been held back by comparative increases in the price of other building materials such as saw lumber and cement.

DepreciationDepreciation costs are also low (0.6% of revenue), with heavy equipment that is usually leased and handled by subcontractors. Oftentimes, heavy equipment can be rented on an as-needed basis which will reduce depreciation costs over owning a fleet of vehicles, bolstering operator margins.

MarketingMarketing costs for industry operators are low, accounting for 0.7% of industry revenue. While there is some spending on promotional materials, industry operators are typically best served via a strong reputation for quality and on time work, as well as fair prices and word of

mouth referrals, since most industry operations take place within geographically defined markets.

RentRent costs are expected to account for an estimated 0.3%. This includes the cost of rented equipment and office space. Typically, machines will be rented on as-needed basis to control costs.

UtilitiesUtilities costs account for 1.1% of industry revenue in 2019. Utilities costs include the cost of heat, power and water consumed on worksites as well as in office buildings. Typically, the majority of this cost segment is to keep front offices open.

OtherOther general operating expenses absorb 17.1% of annual industry revenue and include repairs, insurance and other administrative expenditures. Other costs have not fluctuated dramatically during the five-year period.

Level & Trend Competition in this industry is High and the trend is Steady



Barriers to Entry Aside from minimal state and local licensing requirements, there are no specific barriers to entry for new competitors in the Industrial Building Construction industry. The key constraint to entry is establishing a foothold in the market because new operators lack a reputation for quality service. Existing operators have established relationships with subcontractors, material suppliers, financial institutions and clients in specific industries. This arrangement gives established operators an incumbency advantage, in that they have a work history to which they can point to indicate their success. New operators have no such option. The growing trend for building contractors to take an equity interest in the development consortium on projects effectively blocks competition from other builders.

New entrants with limited financial resources and a narrow network of business contacts will likely be excluded from equity participation in a development consortium.

The regulatory environment in the nonresidential building market is steadily tightening with the widespread recognition among leading industry associations and clients for the American Institute of Constructors’ professional certification programs. Support for this

national accreditation program is gradually gaining momentum to safeguard the industry and insurers by maintaining competency. Failure to obtain registration may restrict newcomers to minor alteration and repair work at the bottom end.

Relative to existing players, small-scale entrants to this industry will be disadvantaged in obtaining insurance coverage due to their lack of a proven track record and demonstrated financial stability. New entrants will likely find it difficult to establish credentials in several of the more specialized and lucrative segments of the market, most notably the capacity to construct complex industrial buildings and processes, such as steel mills, mineral smelters, microchip wafer plants, clean rooms, industrial ovens, kilns and incinerators.

Basis of Competitioncontinued

private sector contracts, but they also establish relationships with prime contractors in a local region or specialized area.

Barriers to Entry checklist

Competition HighConcentration LowLife Cycle Stage MatureCapital Intensity LowTechnology Change MediumRegulation and Policy MediumIndustry Assistance Low


Level & Trend Barriers to Entry in this industry are Medium and Increasing



Industry Globalization

With no imports or exports and a relatively low level of foreign involvement, the Industrial Building Construction industry has a low level of globalization. However, foreign companies do own significant players in the industry. The trend toward foreign ownership of the United States’ major construction companies increased during the 1990s, with several of the largest German construction enterprises (e.g. Hochtief AG and Bilfinger Berger AG) expanding into the US market. At the same time, many US industrial construction operators have operations in foreign countries, including major

stakes in parent companies in countries like Germany (e.g. Hochtief AG and Bilfinger Berger AG), Australia (e.g. Lendlease Group), France (e.g. Suez SA) and Mexico (e.g. Empresas ICA SAB de CV). As the world economy continues to expand and markets in countries including China, Brazil and India continue to exhibit above-average growth, IBISWorld expects globalization to increase slightly as large industrial construction companies seek to gain revenue in new markets; however, some major players such as Jacobs Engineering Group Inc. have been slowly shifting activity back to the United States.

Level & Trend Globalization in this industry is Low and the trend is Increasing


Fluor Corporation (Fluor), founded in 1890 and based in Irving, TX, is a major global player in industrial building construction. The company is publicly listed and organized into five segments: oil and gas; industrial and infrastructure;

government; global services; and power. Fluor generated $19.5 billion in total revenue in 2017 (latest data available). In addition, the company has more than 56,000 employees globally. Fluor’s major industrial projects include an auto plant

Other Company Performance

Jacobs Engineering Group Inc. (Jacobs) provides engineering, design, construction and maintenance services to a range of industries and markets. These markets include petroleum and gas refining; chemicals and polymers; federal infrastructure programs, most notably defense and aerospace programs; civil infrastructure; pharmaceuticals and biotechnology; pulp and paper; technology; automotive; industry; and manufacturing. The company is headquartered in Pasadena, CA, and operates more than 200 offices across more than 30 countries in North America, Europe, the Middle East and Asia. Today, the company employs 74,000 employees worldwide. In its fiscal 2018 results, the company recorded total revenue of nearly $15.0 billion, with US operations accounting for $9.5 billion (latest data available).

In recent years, Jacobs has embarked on several acquisitions, gaining a broader level of market expertise and greater global reach. In February 2014, Jacobs acquired Eagleton Engineering LLC, enhancing its capabilities in the energy market. Furthermore, the company completed the acquisitions of KlingStubbins, a 500-person company headquartered in Philadelphia with offices throughout the United States, and Unique World Pty Ltd., based in Sydney, during the five-year period. Markets served by the acquired companies include corporate and commercial, science and technology, in addition to governmental, higher education, mission-critical and interiors.

Jacobs has been active in merger and acquisition activity. In January 2017, the company purchased Aquenta Consulting Pty Ltd, an integrated project management firm. In August 2017, Jacobs bought Blue Canopy Group LLC, a data analytics and cybersecurity company. In December 2017, technically in fiscal 2018 (year-end September 29), Jacobs completed the acquisition of CH2M Hill Companies Ltd. (CH2M) for $3.3 billion, which has caused industry revenue to jump 63.5% in 2018. This acquisition boosted total company revenue to reach nearly $15.0 billion in fiscal 2018.

Financial performanceOver the five years to fiscal 2019, the company’s total revenue is expected to rise an annualized 0.4% to reach an estimated $12.4 billion. For the bulk of the current five-year period, Jacob’s industry-specific revenue was dogged by rapidly declining commodity prices, which reduced downstream demand for its petroleum and gas refining construction segment. Given that this segment typically accounts for an estimated one-quarter of total business, its continued underperformance has dragged down revenue growth. Overall, IBISWorld expects the company to earn an estimated $2.1 billion in US industry-specific revenue in fiscal 2019, which represents an annualized increase of 7.6% since fiscal 2014, which is largely a result of the CH2M acquisition in fiscal 2018.

Major CompaniesThere are no Major Players in this industry | Other Companies

Jacobs Engineering Group Inc. Market Share: 4.6%

Fluor Corporation Market Share: 3.9%



Major Companies

Through its October 2014 purchase of URS Corporation (URS), AECOM has become one of the largest contractors within the Industrial Building Construction industry. URS was founded in 1951 and focuses on providing program management, planning, design, engineering and construction management services to a variety of private sector clients and public agencies across multiple markets. As a

result, the merger with AECOM has given the resulting entity significant revenue synergies. These revenue synergies include multiple contracts for the US federal government, which is a key client for the company. In fiscal 2018 (latest full-year data, year-end September), AECOM is expected to generate $20.0 billion in global revenue with nearly 90,000 employees across more than 150 countries.

Other Company Performancecontinued

for BMW in California and a state-of-the-art polyacrylonitrile carbon fiber manufacturing line in Alabama for Hexcel Corporation. The company also undertakes small and midsize projects and provides renovation and construction management services.

Fluor operates in the industry through the following four segments: industrial; infrastructure and power; government, diversified services; and energy, chemicals and mining. In the United States, the company has a leading position in the construction of manufacturing facilities. According to Engineering News-Record, Fluor maintains a significant share of the Industrial Building Construction industry, ranking among the top five in the 2018 relevant lists for this industry (latest data available). In addition, the company has also begun steadily shifting more projects back to the United States, accounting for 43.3% of total revenue, up from 34.7% in 2014. However, it should be noted that US-relevant operations as a share of total revenue have been declining since a peak of 52.0% in 2016, which has pushed the company’s industry-specific revenue down in 2017 and 2018.

Fluor has not been very active in merger and acquisition activity, making one acquisition in 2016. In March 2016, Fluor acquired all outstanding stock of

Stork Holding BV, a Netherlands-based engineering firm, which primarily undertakes maintenance, modification and asset integrity services for industrial facilities in the oil and gas, chemicals, petrochemicals, industrial and power markets, for the sum of $300.0 million.

Financial performanceThe company’s industry-specific revenue is anticipated to account for 3.9% of the total market in 2019. Falling revenue is primarily a result of reduced demand for the company’s industrial and infrastructure business segment, which builds structures used in mining and major infrastructure projects. Revenue from this segment fell an astonishing 44.5% in 2014, as mining activity plunged due to falling commodity prices. Such declines led to large decreases in total industry-specific revenue. These headwinds persisted into 2015, as major capital projects were postponed by metal and mining business clients amid continued slack in the commodities markets. Over the five years to 2019, IBISWorld projects industry-specific revenue to fall an annualized 5.3% to $1.8 billion. Declines in more recent years have also been indicative of Fluor transitioning to more operations overseas in more recent years, reducing total US- and industry-specific revenue in 2018 and in 2019.

AECOM Market Share: 2.2%



Major Companies

The company’s industry-specific operations occur in both the professional technical services and management support services divisions. With the acquisition of URS, AECOM has grown significantly over the past five years, enabling it to expand its presence in new markets, such as the

growing oil and gas markets. Moreover, in its 2018 report, Engineering News Record ranked URS among the top 20 contractors in the industrial building construction market. In 2019, the company is expected to generate $1.0 billion from industry-specific operations.

Other Company Performancecontinued


Capital Intensity The Industrial Building Construction industry has a low level of capital intensity. IBISWorld estimates that for every $1.00 spent on wages, the average operator spends $0.04 in capital investment. Wages are the significant expense for operators, consuming an estimated 14.2% of revenue in 2019. Conversely, depreciation (used as a proxy for capital investment) accounts for only 0.6% of revenue. General contractors rarely outright purchase whatever heavy equipment is used during the construction; rather, heavy equipment and machinery are either rented or owned by subcontractors. Therefore, wages outweigh capital investment as a part of business operations in this industry.

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Capital Intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit

Industrial Building

Construction

ConstructionEconomy

Level The level of capital intensity is Low


Operating Conditions

Revenue Volatility Revenue in the Industrial Building Construction industry has demonstrated a high level of volatility over the past five years. Similar to much of the Construction sector (IBISWorld report 23), this industry rises and falls in response to cyclical building cycles. For industrial construction, these cycles are influenced by factors such as movements

in long-term interest rates, general economic growth, consumer spending and the level of US exports. During the current five-year period, volatility has been most affected by movements early in the period, where manufacturers increased investment activity strongly, which then declined steadily, causing large swings in revenue.

Technology and Systems

Technological advancements in building techniques, equipment and materials have significantly altered industry activities over the past 20 years. Improved construction techniques, particularly associated with construction methods that use reinforced concrete and glass to replace traditional bricks and steel, have resulted in substantial cost savings and shorter construction periods.

Better management techniques may enable operators to quickly identify deviations from the planning path. Over the past decade, there has also been a steady introduction of computerized logistic management in project design and construction. Using computer-aided design, stock-flow software packages and personnel skilled in logistics, this industry has achieved substantial improvements in productivity and cost savings.

Demand for manufacturing and industrial building construction is particularly sensitive to technological

changes in the economy. Advancements in manufacturing equipment and products generate demand for the construction of new and sophisticated industrial buildings (e.g. semiconductor plants and laboratories). Furthermore, the introduction of increasingly capable robots and automated systems has caused certain manufacturers in key industries to return back to the United States. According to a 2011 report, Made in America, Again: Why Manufacturing will return to the US, by the Boston Consulting Group, many manufacturers by 2016 will find it more economical to manufacture many goods in the United States given logistical advantages and higher US worker productivity. However, advancements in capital equipment used in the manufacturing process may reduce demand for new building construction relative to total capital expenditure (i.e. installing new capital equipment into existing buildings).

Level The level of technology change is Medium

Level The level of volatility is High



Regulation and Policy Similar to other construction sectors, the Industrial Building Construction industry is exposed to a variety of federal, state and local government regulations. Regulations include building standards, pollution controls (noise, air and effluent), competing land usage, disruption to existing businesses or residents and occupational health and safety issues. These factors increase the cost of doing business, but they also act as barriers to entry for new participants.

Health and safety regulations require that workers have safe conditions at all times, including protective clothing, scaffolding, ventilation and harnesses. The Federal Occupational and Safety Health Administration enforces standards for the construction industry, which are contained in Title 29 of the Code of Federal Regulations Part 1926. Furthermore, state and local building authorities assess and enforce this code.

Currently, a broad range of codes govern industry activity, including general building codes, residential codes, mechanical codes, plumbing codes, electric codes, fire codes, accessibility codes, zoning codes, state codes, local codes and ordinances. Building codes are

endorsed by the International Code Council (ICC), which is an umbrella organization that consists of three regional model code groups in the United States: the Southern Building Code Congress International, the Building Officials and Code Administrators and the International Conference of Code Officials. The ICC publishes an international building code, an international residential code and specific codes covering areas such as electrical and plumbing services. General building code topics include: building planning, fire protection, building envelope, structural systems, structural and nonstructural materials, building services and special services.

Building codes are based on standards developed to determine the quality of material and the workmanship involved in construction. There are multiple levels of checking for a building’s compliance with codes before and during the construction. First, project architects and consulting engineers check the design against current codes and standards and submit the designs to local jurisdictions to obtain the permit for construction. Then, governmental code officials verify

Revenue Volatilitycontinued

Level & Trend The level of Regulation is Medium and the trend is Steady



Industry Assistance Over the past five years, federal and local governments across the country have increasingly encouraged a manufacturing revival through targeted financial and structural incentives, as well as through government contracts. Developments that meet certain employment thresholds often qualify for tax exemptions or credits. These programs have begun to lure manufacturers in certain industries, such as Green Technology, back to the United States, generating demand for new industrial facilities. In addition,

larger players in this industry benefit from government procurement policies favoring tenders by US companies, especially on defense-related contracts. Additionally, the industrial building construction industry receives assistance from professional associations, such as the Associated General Contractors of America (AGC), that provide companies with training programs, conferences and opportunities to build relationship across different geographic regions and sectors.

Regulation and Policycontinued

the compliance with codes and standards and issue a permit to enable construction to begin. Finally, local jurisdictions periodically inspect and enforce codes during the project’s construction; architects and consulting engineers request an occupancy permit upon completion; and the local jurisdiction check that the building complies with the codes before issuing the final occupancy permit.

Participants do not need to hold official accreditation to operate; however, six major trade and professional associations have officially endorsed the American Institute of Constructors (AIC) constructor certification program, which qualifies individuals through education, experience and examination for the professional designations of Associate

Constructor and Certified Professional Constructor. Since 1997, the AIC accreditation program has sought to strengthen its professional rigor and meet international accreditation standards. Subsequently, most major construction industry associations currently endorse the AIC certification. These associations include the Associated General Contractors of America, the American Subcontractors Association, Associated Builders and Contractors, the Business Roundtable, the American Council for Construction Education and the American Society of Professional Estimators. Most larger-scale industry participants maintain quality certification under ISO 9002, which is often a prerequisite for tendering large-scale projects.

Level & Trend The level of Industry Assistance is Low and the trend is Increasing


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments Enterprises Employment Exports ImportsWages ($m)

Domestic Demand

Industrial Production Index

2010 26,643.5 6,108.0 3,528 3,369 75,664 -- -- 5,308.7 N/A 94.12011 25,726.1 6,507.2 3,564 3,301 81,500 -- -- 5,555.4 N/A 97.12012 29,873.9 6,496.0 3,196 3,020 73,079 -- -- 5,121.8 N/A 100.02013 32,014.0 6,824.5 3,209 3,023 77,652 -- -- 5,575.9 N/A 102.02014 36,457.8 7,709.0 3,162 2,979 82,398 -- -- 5,922.5 N/A 105.22015 45,906.4 8,894.0 3,231 3,033 88,481 -- -- 6,461.0 N/A 104.12016 44,596.1 8,735.4 3,307 3,092 89,607 -- -- 6,327.2 N/A 102.12017 42,949.7 8,546.9 3,254 3,045 87,911 -- -- 6,184.7 N/A 104.42018 45,381.7 8,824.5 3,307 3,085 91,599 -- -- 6,462.3 N/A 108.62019 46,320.6 9,167.0 3,315 3,089 93,121 -- -- 6,574.9 N/A 111.12020 47,317.8 9,377.6 3,354 3,123 95,208 -- -- 6,721.1 N/A 112.42021 48,086.7 9,555.5 3,389 3,154 96,904 -- -- 6,838.7 N/A 112.92022 48,831.0 9,721.8 3,430 3,191 98,502 -- -- 6,950.1 N/A 113.52023 49,646.3 9,886.7 3,471 3,227 100,029 -- -- 7,059.5 N/A 114.12024 50,491.8 10,060.0 3,509 3,261 101,591 -- -- 7,171.7 N/A 114.8Sector Rank 17/35 22/35 33/35 33/35 27/35 N/A N/A 23/35 N/A N/AEconomy Rank 216/694 273/694 437/694 409/694 320/694 N/A N/A 238/694 N/A N/A

IVA/Revenue (%)

Imports/ Demand

(%)

Exports/Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2010 22.92 N/A N/A 352.13 19.92 21.45 70,161.50 0.042011 25.29 N/A N/A 315.66 21.59 22.87 68,164.42 0.042012 21.74 N/A N/A 408.79 17.14 22.87 70,085.80 0.042013 21.32 N/A N/A 412.28 17.42 24.20 71,806.26 0.042014 21.14 N/A N/A 442.46 16.24 26.06 71,876.74 0.052015 19.37 N/A N/A 518.83 14.07 27.39 73,021.33 0.052016 19.59 N/A N/A 497.69 14.19 27.10 70,610.55 0.052017 19.90 N/A N/A 488.56 14.40 27.02 70,351.83 0.052018 19.45 N/A N/A 495.44 14.24 27.70 70,549.90 0.052019 19.79 N/A N/A 497.42 14.19 28.09 70,605.99 0.052020 19.82 N/A N/A 496.99 14.20 28.39 70,593.86 0.052021 19.87 N/A N/A 496.23 14.22 28.59 70,571.91 0.052022 19.91 N/A N/A 495.74 14.23 28.72 70,557.96 0.052023 19.91 N/A N/A 496.32 14.22 28.82 70,574.53 0.052024 19.92 N/A N/A 497.01 14.20 28.95 70,593.85 0.05Sector Rank 31/35 N/A N/A 6/35 31/35 2/35 6/35 22/35Economy Rank 506/694 N/A N/A 205/694 413/694 194/694 171/694 273/694

Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)

Industrial Production Index

(%)2011 -3.4 6.5 1.0 -2.0 7.7 N/A N/A 4.6 N/A 3.22012 16.1 -0.2 -10.3 -8.5 -10.3 N/A N/A -7.8 N/A 3.02013 7.2 5.1 0.4 0.1 6.3 N/A N/A 8.9 N/A 2.02014 13.9 13.0 -1.5 -1.5 6.1 N/A N/A 6.2 N/A 3.12015 25.9 15.4 2.2 1.8 7.4 N/A N/A 9.1 N/A -1.02016 -2.9 -1.8 2.4 1.9 1.3 N/A N/A -2.1 N/A -1.92017 -3.7 -2.2 -1.6 -1.5 -1.9 N/A N/A -2.3 N/A 2.32018 5.7 3.2 1.6 1.3 4.2 N/A N/A 4.5 N/A 4.02019 2.1 3.9 0.2 0.1 1.7 N/A N/A 1.7 N/A 2.32020 2.2 2.3 1.2 1.1 2.2 N/A N/A 2.2 N/A 1.22021 1.6 1.9 1.0 1.0 1.8 N/A N/A 1.7 N/A 0.42022 1.5 1.7 1.2 1.2 1.6 N/A N/A 1.6 N/A 0.52023 1.7 1.7 1.2 1.1 1.6 N/A N/A 1.6 N/A 0.52024 1.7 1.8 1.1 1.1 1.6 N/A N/A 1.6 N/A 0.6Sector Rank 17/35 4/35 28/35 30/35 17/35 N/A N/A 19/35 N/A N/AEconomy Rank 239/694 88/694 472/694 471/694 285/694 N/A N/A 285/694 N/A N/A

Annual Change

Key Ratios

Industry Data



Apr 2017 - Mar 2018 by company revenueApr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium LargeMar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)

Liquidity Ratios

Current Ratio 1.4 1.4 1.4 1.4 1.6 1.5 1.2Quick Ratio 1.2 1.2 1.2 1.2 1.4 1.3 1.1Sales / Receivables (Trade Receivables Turnover) 6.7 6.6 6.6 6.9 8.6 6.7 5.5

Days’ Receivables 54.5 55.3 55.3 52.9 42.4 54.5 66.4Cost of Sales / Inventory (Inventory Turnover) n/c n/c n/c n/c n/c n/c n/c

Days’ Inventory n/a n/a 0.4 0.4 0.4 0.4 0.4Cost of Sales / Payables (Payables Turnover) 10.2 10.2 9.7 11.2 18.4 10.7 8.2

Days’ Payables 35.8 35.8 37.6 32.6 19.8 34.1 44.5Sales / Working Capital 14.0 13.9 16.6 15.2 15.5 12.9 17.4

Coverage Ratios

Earnings Before Interest & Taxes (EBIT) / Interest 14.9 20.9 20.2 21.3 11.4 28.3 19.9

Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 3.4 4.1 4.6 7.1 n/a 9.0 4.7

Leverage Ratios

Fixed Assets / Net Worth 0.3 0.3 0.3 0.3 0.3 0.2 0.3Debt / Net Worth 2.0 1.8 2.0 1.7 1.3 1.7 3.2Tangible Net Worth 32.5 34.4 33.3 34.5 37.0 38.9 22.2

Operating Ratios

Profit before Taxes / Net Worth, % 26.7 30.1 34.2 32.5 37.4 30.5 26.5Profit before Taxes / Total Assets, % 8.0 8.1 9.5 9.7 12.4 10.1 6.3Sales / Net Fixed Assets 36.8 39.2 36.2 33.6 23.8 43.5 36.0Sales / Total Assets (Asset Turnover) 2.9 2.9 2.9 2.9 3.0 3.0 2.9

Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading 13.9 15.3 14.8 15.9 25.3 14.6 8.4Cash after Operations 2.8 3.9 4.1 3.8 3.3 4.4 3.1Net Cash after Operations 2.8 4.1 4.3 3.9 3.2 4.6 3.6Cash after Debt Amortization 0.4 1.6 1.2 1.3 n/a 2.3 0.8Debt Service P&I Coverage 3.3 4.4 5.3 3.9 1.9 4.8 7.7Interest Coverage (Operating Cash) 10.4 13.8 21.5 13.9 10.2 20.4 16.2

Assets, %

Cash & Equivalents 20.2 20.4 20.1 21.6 21.7 21.7 21.3Trade Receivables (net) 43.1 43.4 42.7 42.0 34.7 44.8 49.5Inventory 3.6 3.6 2.7 3.1 3.8 3.6 1.0All Other Current Assets 8.0 7.5 7.5 6.8 4.6 7.6 9.3Total Current Assets 74.9 74.9 72.9 73.6 64.9 77.7 81.0Fixed Assets (net) 15.2 15.5 17.3 16.2 20.4 14.2 12.9Intangibles (net) 2.6 2.2 2.5 4.3 6.0 3.2 3.2All Other Non-Current Assets 7.3 7.4 7.3 5.9 8.7 4.9 2.9Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0Total Assets ($m) 7,642.6 8,373.6 6,708.4 6,598.7 239.8 1,476.8 4,882.1

Liabilities, %

Notes Payable-Short Term 6.7 5.5 5.4 5.2 7.9 4.0 2.7Current Maturities L/T/D 1.8 1.8 2.2 2.2 3.1 1.7 1.5Trade Payables 27.5 26.3 27.7 25.7 19.3 26.9 34.6Income Taxes Payable 0.3 0.2 0.3 0.2 0.3 0.2 0.2All Other Current Liabilities 16.0 18.8 16.6 16.5 12.0 17.8 22.1Total Current Liabilities 52.3 52.6 52.2 49.9 42.6 50.6 61.2Long Term Debt 8.6 7.5 9.6 9.1 11.9 5.7 10.5Deferred Taxes 0.3 0.3 0.3 0.3 0.3 0.3 0.3All Other Non-Current Liabilities 3.8 3.0 2.1 2.0 2.2 1.4 2.6Net Worth 35.1 36.6 35.8 38.8 43.0 42.1 25.4Total Liabilities & Net Worth ($m) 7,642.6 8,373.6 6,708.4 6,598.7 239.8 1,476.8 4,882.1

Maximum Number of Statements Used 439 411 363 357 135 144 78

Industry Financial Ratios

Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects.Note: For a full description of the ratios refer to the Key Statistics chapter online.


Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

Industry Jargon

IBISWorld Glossary

DEVELOPMENT CONSORTIUM A group of developers used to construct a building or complex.

INDUSTRIAL BUILDING A building primarily used to accommodate capital equipment for the manufacturing, packaging or storage of products.

TENDER A written offer or bid to contract goods or services at a specified cost or rate.

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Documents

IBISWorld Industry Report 23621 Industrial Building