美國(guó)工廠建筑行業(yè)概覽-North American Engineering and Construction Industry Overview 2023

FMI

2023

NorthAmericanEngineeringandConstructionIndustryOverview

FirstQuarterEdition

January2023

TableofContents

2023ExecutiveOverview

RenewFocusonYourStrengths,PeopleandOperationstoWithstandaDownturn1

U.S.EngineeringandConstructionOutlook

Introduction

6

KeyTakeaways

6

ResidentialConstructionPutinPlace

10

Single-family

11

Multifamily

12

Improvements

12

NonresidentialBuildingsConstructionPutinPlace

13

NonresidentialConstructionIndex(NRCI)

15

Lodging

17

Office

17

Commercial

18

HealthCare

18

Education

19

Religious

19

PublicSafety

20

AmusementandRecreation

20

Transportation

21

Communication

21

Manufacturing

22

NonbuildingStructuresConstructionPutinPlace

23

Power

24

HighwayandStreet

24

SewageandWasteDisposal

25

WaterSupply

25

ConservationandDevelopment

26

ConstructionPutinPlaceSummaryTables

27

RegionalSummary

29

ConstructionPutinPlacebyCensusDivision

31

CanadaEngineeringandConstructionOutlook

Introduction

41

ConstructionPutinPlaceSummaryTables

46

Appendix(U.S.)

48

Authors

51

RenewFocusonYourStrengths,

PeopleandOperations

toWithstandaDownturn

MessagefromChrisDaum,CEOofFMI

A

sweenter2023,muchhasbeenwrittenabout

thecurrenteconomicclimatefor

thebuiltenvironment.Theoperat-ingconditionsformanyfirmsacrossourindustryremaindisruptedanduncertainnearlythreeyearsaftertheonsetoftheCOVID-19pandemicandtheresultingmarketturmoil.

Wecontinuetoseenear-recordinflation,withDecember’scon-sumerpriceindexreadingof6.5%downfromamid-2022peak,butsignificantlyhigherthantheprioryear.Supplychainsstillfacedisrup-tionsacrossglobalmarkets,andcompaniesacrosssectorsofengi-neeringandconstruction(E&C)continuetostruggletofindthetal-entneededtoexecutenewandexist-ingprojects.

Despitesomeofthesechallenges,manyofourclientssawrecordback-

logs,earningsandrevenuein2022.TotalconstructionspendingfortheU.S.isexpectedtoend2022up8%,drivenprimarilybyresidentialbuilding,multifamily,commercialandmanufacturing.

“Obviously,there’salotgoingonintheworldrelatedtorecord-highinflation,supplychainchallenges,resourcechallenges,butyet,con-structionandbuildinghastrudgedforward,”saysKeithDouglas,chiefoperatingofficeratRosendin,a$2billion,employee-ownedelectricalcontractor.“Ownersarestillpushingthroughandwantingtobuildtheirprojects,butwearestartingtoseesomecracksoutthere.”

Someofthosecracksareprojectedtocomefromtheresidentialmar-kets,whichwillbethebiggestcauseofa2%forecastdeclineinconstruc-tionspendingfor2023.Incontrast,

othersegments,suchasnonresiden-

tialbuildingandnonbuildingstruc-

tures,areexpectedtogrowin2023,

eachforecasttoclimb8%in2023,

meaningalargeportionofthe

industrywillcontinuetoseegrowth.

Giventhisunevenlandscape,to

competein2023,itiscriticalto

understandyourcorecompetencies,

marketsandclients.Knowingyour

opportunitiesandchallengesand

havingaplanfortacklingthemwill

helpyourcompanycontinuetobe

successful.Furthermore,firmsthat

focusontheirpeopleandculture

andexecuteaclearstrategywillbe

morelikelytoweathertheupcom-

ingdownturn.

1

FMI2023NORTHAMERICANENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

COPINGWITHTHE

CURRENTOPERATINGENVIRONMENT

Whentalkingwithourclients,we

consistentlyhearthattheirtopthreechallengesarearoundfindingandretainingskilledworkersbothinthefieldandoffice,creatingacohesiveandconnectedculturetonurturetheirworkersthroughtheircareersand,intheshortterm,combatingprojectdelays.

RecentFMIresearcharoundprojectdelaysandcancellationbacksup

whatwe’rehearingfromclients.AccordingtoasurveyconductedinSeptember,89%ofrespondentsexperiencedowner-ledprojectstartdelaysin2022.Another44%sawsupplychain-relatedprojectdelays.Only8%ofthosesurveyedsaidtheyhadnotexperiencedanyprojectstartdelaysin2022.

DanJohnson,chiefexecutiveofficer

atMortensonConstruction,amulti-billion-dollargeneralcontractor,agrees,“Weareentering2023withrecordlevelsofbacklog,butwehavealsostartedtoseetheplatesshiftin

thelastmonthwithprojectsbeingcanceledandprojectsbeingputonholdforavarietyofreasons.Techindustryandrelatedprojectsnowarestartingtobeputonhold.Ourrenewableenergybusinessisdefi-nitelysomethingweseealotofpotentialinthelongterm;butintheshortterm,ourcustomersarestrug-glingtogetsolarpanels,sotheproj-ectsarewaitingforthesupplychaintocatchup.”

Hispointabouttheoutlookfordif-ferentsectorsvaryinggreatlyisanimportantone,andsomethingyou’llseethroughoutthisquarter’sfore-castnumbers.AsJayBowman,headofourmarketresearchconsultingpractice,says,“Bullmarketsandbearmarketscoexistatalltimes.”

Thefollowingsector-specificinfor-mationconsidersinflationarypres-sures,incomingfederalfundingfromavarietyofsources,andthesocietalshiftsthatareimpactingoverallconstructionspending.It’snotenoughtolookattheinitialnumbers;youneedtodelveintoeconomicconditionsthatfluctuate

greatlybysectorandgeography.

REFINEBUSINESS

DISCIPLINEAND

OPERATIONAL

EXECUTION

Whilenumbersanddataareimport-ant,theycan’treplacehavingacom-prehensivestrategyandthetoolstoimplementthoseplans,fromtrain-ingyourpeopletoimplementingoperationalimprovements.Nowisthetimetoassessyourbusinessandplanforwhat’sahead.Puttinginplacetherightteamsandplansforbusinessdevelopmentandmarket-ingwillbeacriticalwaytomakesureyouarerebuildingyourback-logswithworkthatyoucansuccess-fullyexecute.

“Tobeeffectiveinany

typeofastrategy,it

needstobeembraced

byeveryindividual

withintheorganization.”

—DanJohnson

ChiefExecutiveOfficer

MortensonConstruction

FMI2023NORTHAMERICANENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

2

Ifyouhaven’t

investedinclearly

articulatingyour

company’sculture

andwhatyoustandfor,thenhowcanyouexpectyourworkersacrossvarious

projectstoembrace

thatandact

accordingtoyourvalues?

Stayingfocusedandbeingselectiveaboutwhatprojectsyoupursue

willbeimperativeinthecomingmonthsandyears.Tobeselective,nomatterthemarketconditions,design,engineeringandconstruc-tionfirmsneedsuperiorexecutionskillsandstrategicclarityaroundtheircorecompetencies.

“Asbacklogscontinuetobestrong,thebestthingwecandotoprepareistoensurethenewworkwepursueistherightwork,”saysGeorgePfeffer,

chiefexecutiveofficerandleadershipteammemberofDPRConstruction,a$6.8billion,self-performinggen-eralcontractor.“Ourearlysign,likemostcontractors,isthataslowdownofsomesortiscomingas,morethannormal,ourprojectsarepushingtolatertimeframes.Weneedtopursueworkthatallowsusthebestopportu-nitytoovercomeshortagesinskilledworkforceaswellasthevolatilityincommoditiesmarketsthataffects

procurement.Thebestwaytodothat,wethink,isnottopursuenewsectors,buttofocusonthethingsweknowwe’rebestat.”

Formanyitcanbedifficulttoknowexactlywhatdifferentiatestheircompanyfromothersandhowtopositiontheirteamstowinwork.That’swhyit’simportanttohaveaclearstrategyandtocommunicatethatstrategytoeveryoneonaregu-larbasistoensureallteamsareworkingtowardthesamegoal.

“Tobeeffectiveinanytypeofastrat-egy,itneedstobeembracedbyeveryindividualwithintheorganization,”saysJohnson.“Ifthey’renotawareofit,thenthey’renotgoingtobework-

ingtowardit.Sothemorethatyoucancommunicatethestrategy,answerthewhy,you’regoingtogetalotmorepeoplebehindit.You’regoingtobefarmoresuccessful.”

FOCUSONCULTURE

Fordecadeswe’vebeentalkingaboutlaborshortages,andgiventhecur-renttrajectory,thoseissuesaren’tgoingawayanytimesoon.We’relos-ingexperiencedfieldleadersaswellasprojectmanagersandcompanyexecutivesdaily.Withmanyyoungerworkersabouttofacetheirfirsteco-nomicdownturnintheworkforce,havingclear,consistentandconfi-dentleadershipwillbeimportantforhelpingshepherdthoseemployeesthroughadownturn.

That’swherecommunication

becomesevenmoreimportant.Beinghonest,transparentandclearaboutyourbusiness,thestrategyyou’reimplementingtobesuccess-ful,andtheculturethatdrivesyourbusinesswillhelpeveryemployeefeelasenseofownershipandprideinhisorherwork.

FMI2023NORTHAMERICANENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

3

Ifyouhaven’tinvestedinclearlyarticulatingyourcompany’scultureandwhatyoustandfor,thenhowcanyouexpectyourworkersacrossvariousprojectstoembracethatandactaccordingtoyourvalues?

Pfeffersaysthatit’simportanttotaketimetomakesureemployeesareclearonwhat’sdrivingtheirdecisionsandactions.“Cultureissimplytheactionspeoplechoosetotake,”hesays.“Ourbasicbeliefsarethatwehavetooperatefromabasisofrespectfortheindividualandwewanttochangetheworld.Ifyou’re

tryingtodecideinstantaneously,andyouhavegottoprocessalltheseinputs,theclarityshouldbeinourcorevalues,ourbeliefsthathelpdriveyourdecisionsandactions.”

Onecriticalwaytosolvethelaborchallengeisbyinvestingintraininganddevelopment.Demonstratingtoyouremployeesthateveryoneisval-uedandtakinganinterestinmakingsurethey’regettingtheskillsneededtoadvanceintheircareerswillhelpretaintheworkersyouhaveandattracttheonesyouneed.

“Youhaveto

continuallyrecruit

thepeoplewhowork

foryouandinvestin

theirfutures.”

—ScottWinstead

President

FMIConsulting

2023M&ATRENDS

Giventheoverallstrengthoftheindustry,mergersandacquisitions(M&A)formiddle-marketcompaniesinthebuiltenvironmentremainrel-ativelyactive.Thisisincontrasttolargerdealsandcapitalmarketsactivity,whicharefeelingtheeffectsofuncertaintiessuchasrecession,

inflation,geopoliticalrisks,deglobal-ization,soaringdeficitsandvolatilefinancialmarkets.

WeattributethiscontinuedstrengthwithinFMI’scoveragesectorspar-tiallytothefactthatourtypicaldealsize($40millionto$600millioninenterprisevalue)canoftenbelesssensitivetoglobalriskfactorswhencomparedtolargerdeals.Moreimportantly,weattributethisongo-ingM&Aactivitytofavorablemega-

trendsthataredrivingthelong-termgrowthofmanyofoursectors.

EmergingtrendssuchasreshoringandgovernmentspendingprogramsfocusedoninfrastructurearealsodrivinggrowthandM&Ainterestinmanysectorsofthebuiltenviron-ment.Forsectorswecover,includ-ingconstructionmaterialsandenergysolutionsandcleantech,weareseeingincreasedgovernmentfundingfrombillssuchastheInfra-structureInvestmentandJobsAct(IIJA)andInflationReductionAct(IRA)drivesubstantialinvestmentandinterestfromprivateequity,pushingcompaniestobecomeacquisitivetocompete.

Overarchingandwell-establishedtrendsthatarehelpingdrivetoday’sM&Aincludetheenergytransition;

laborshortages;agingowners;private

equityinvestment;rapidtechnology

advancement;environmental,social

andgovernanceconsiderations;and

deferredmaintenanceandunderin-

vestmentinU.S.infrastructure.

M&Atrendsmovequickly,eachsec-

torbehavesdifferently,andevery

companyisunique.Weremaincau-

tious,giventheimmediatemacro

challenges,butoptimistic,giventhe

uniqueopportunitiesweseein

over-coverageareas.Thesepageswill

provideyousomeinsightsbysector

onwhereweseethemarkettrending.

—TimHuckaby

President

FMICapitalAdvisors

4

FMI2023NORTHAMERICANENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

DON’TFORGETLESSONSLEARNEDFROM

PREVIOUSDOWNTURNS

Formostofus,thisisn’tthefirsttimewe’vehadtomanagethroughadown-turn.Butduringtimeslikethese,it’shelpfultorememberimportantles-sonsfrompreviousrecessionaryenvi-ronments.Theseinclude:

Maketimelydecisions.Duringthelastdownturn,weheardfrommanyclientsthattheymadetherightdeci-sions,buttheyjustdidn’tactquicklyenough.Don’twaittomakenecessarychangestoensureyouareimple-mentingyourstrategyandgoingafterworkthatreinforcesyourplans.

Focusonyourcorecompetencies.

Giventheunevenoutlookfordiffer-

entsectorsintheindustry,itmightbetemptingtomoveintoahotmar-ket.Butdoingsowithoutproperresearch,thoughtandstrategicplan-

ningcouldhavedireconsequences.Besureyou’regoingafterworkthatyouknowyoucanexecutewellandmakemoneydoingso.

Concentrateonbusinessdevelop-ment.Nowisthetimetostayclosetoyourclientsandtrulylistentotheirneeds.Equipyourteamswiththeskillsneededtocontinuallywinworkonthedifferentiatorsyoubringtotheproject.Simplyreducingmarginsisoftenuntenablebutcanbeespeciallydangerousinadownturn.

Investinyourpeople,processesandsystems.Whileitisimportanttomaintainfiscaldisciplineandahealthybalancesheetduringleanertimes,youcan’tneglectyourpeople.Labormarketsremaincompetitive,andyouneedtomakesureyouretainthecriticaltalenttoleadyourbusi-nessnowandthroughthenexteco-nomiccycle.

Douglassaiditbest:“Havingastra-tegicplanisvitallyimportantforanybusinessrightnow.Andiftheydon’thaveone,Iwouldencouragethemtoreallythinkhardaboutthatstrategicplanbecausewe’regoingtohavetopullalotofleversoverthenextfewyearsjustdependingoncertaincon-ditions.Andyou’vegottobereadyforthose.Ifsomethinghappensoverhere,you’vegottobeabletoshiftandpivot.AndIthinkthat’sgoingtobethedifferencebetweencompa-niesthatgetthroughwhat’sgoingtohappeninthenextcoupleyearsandcompaniesthatreallythrive.”

FMI2023NORTHAMERICANENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

5

U.S.Engineeringand

ConstructionOutlook

LastyearFMIaltereditsbasecaseassumptionsforourforecaststoincludea

recessionin2022and2023.Aswithhistoricalcontractionarycycles,theimpactontheengineeringandconstructionindustrywillbelonger-lasting.

Economicfactorsinfluencingthisforecastincludeongoingshortagesofkey

materialsandlaboracrossvariousindustries;challengesandopportunities

associatedwiththereopeningofinternationalborders;geopoliticalterritorialandtradetensions;impactsandvolatilityinrealestate,financialandequitymarkets

associatedwithadeeplyinvertedyieldcurve,ongoingquantitativetighteningandratehikes;andcontinuedinflationarypressurestiedtoheightenedlivingexpenses,energycosts,strengthintheU.S.dollarandrisingwages.

Therearealsonowmultiplelayersofinterconnectedgovernmentpolicyinplace

influencingnewopportunitiesacrossvariousprogramsstemmingfromthe

InfrastructureInvestmentandJobsAct(IIJA),theCHIPSandScienceAct(CHIPS),andtheInflationReductionAct(IRA).Combined,thesepolicieswillreinforcelong-termeconomiccompetitivenessandresilience,andultimatelywillbecomeamajordrivingforceacrossseveralkeyareasofourindustry.

FMIanticipatestheU.S.economywillfarebetterthanthatofmostcountries

intheyearsahead,asreflectedbythestrengthinlabormarkets,theappetite

forinnovation,andtheserecentsignificantpoliciessupportinglong-term

manufacturing,infrastructureandinstitutionalinvestments.Asaresult,the

engineeringandconstructionindustryisexpectedtoplayamajorroleinour

economy’sfoundationalstrengthoverthecomingyears.

.TotalengineeringandconstructionspendingfortheU.S.isforecasttoend2022up8%,thesameincreasesasin2020and2021,allledprimarilybyresidentialconstruction.

.Lookingto2023,FMIforecastsa2%declineinengineeringandcon-structionspendinglevelscomparedto2022duetoananticipatedfallinresidentialconstruction.

.High-growthsegmentsin2022includemultifamily,residentialimprovements,commercial,man-ufacturing,sewageandwastedis-posal,watersupply,andconserva-tionanddevelopmentconstruction,

U.S.KeyTakeaways

eachwithannualgrowthratesexceeding10%.

.Alimitednumberofsegmentsareexpectedtoendtheyearwithgrowthratesbetween0%and4%,orroughlyinlinewithhistoricalratesofinflation.Thesesegmentsincludelodging,office,educational,transportationandcommunica-tion.Elevatedinflationintheindus-tryin2022isdrivingoutputcontrac-tionacrossthesesegments.

.Onlyreligious,publicsafetyandpowersegmentsareexpectedtodeclinein2022.Reallossesinoutput(e.g.,squarefootage,

installedcapacity,etc.)arepro-jectedtobesignificant,especiallyinpower.

.ThelatestNonresidentialConstruc-

tionIndex(NRCI)scoreof46.4,nearlyflatfromthepreviousquar-ter’sscoreof46.3,suggestsongoingconcernsintothefirstquarterof2023.Economicandindustrysen-timentfellslightlybutisbalancedbyimprovingproductivityandfallingcostpressuresinmaterialsandlabor.Theindexhasremained

under50forthreequartersandindicatesfewerfutureengineeringandconstructionopportunitiesinto2023.

U.S.2022SegmentPerformance

2022/2021Comparison

UP

5%ormore

STABLE

0%to4%

Office

Educational

Transportation

Communication

DOWN

Under0%

Religious

PublicSafety

Power

Single-Family

Multifamily

Improvements

Lodging

Commercial

HealthCare

AmusementandRecreation

Manufacturing

HighwayandStreet

SewageandWasteDisposalWaterSupply

ConservationandDevelopment

7

FMI2023NORTHAMERICANENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

MILLIONSOFCURRENTDOLLARS

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022F

2023F

2024F

2025F

2026F

TotalConstructionSpendingPutinPlace

EstimatedfortheUnitedStates

$1,000,000$900,000$800,000$700,000$600,000$500,000$400,000$300,000$200,000$100,000

$0

FORECAST

SHADEDAREASINDICATERECESSIONYEARS

RESIDENTIALNONRESIDENTIALBUILDINGSNONBUILDINGSTRUCTURES

SOURCE:FMIFORECASTQ12023

Firstquarterforecastbasedonthirdquarter2022actualsandfourthquarterassumptions.

8

FMI2023ENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

TotalConstructionSpendingPutinPlace2021and

ForecastGrowth(2021through2026)

byMetropolitanStatisticalArea

BUBBLESIZEREPRESENTSTOTALPUTINPLACE

CONSTRUCTIONSPEND2021

CAGR2021-2026

-25%

25%

SOURCE:FMIFORECASTQ12023

9

FMI2023NORTHAMERICANENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

ResidentialConstruction

PutinPlace

CoreCPI

SINGLE-FAMILYRESIDENTIAL

DRIVERS:

rate

Unemployment

6%

Income

.Mortgagerates

.Homeprices

.Housingstarts

Housingpermits

$455BILLION

2022/2021Comparison

2001

2026

FORECAST

2023DWN

-20%$362B

2024DWN

-13%$316B

2025STA

2%$321B

2026UP

5%$338B

.Single-familyhomeconstructionlikelypeakedinthesummerof2022,withfuturecontractionanticipatedwellinto2025.TheabruptreversalindemandwasledbytheFederalReserve’smeasurestoreduceinflation,includinganaggres-siveratehikescheduleandquantitativetightening.Thesepoliciesquicklyloweredconsumerpurchasingpower,buildersentiment,mortgageapplications,startsandhomepricesthroughthesecondhalfoftheyear.Atthesametime,pan-demic-fueledmobilitysloweddramatically.FMIanticipatesongoingtightpolicieswillweighonlabormarketsthroughmostof2023,addingtohomesavailableasconsumerpur-chasingpowerisweakened.

.Single-familyisentering2023firmlyinabuyer’smarket,withmorethaneightmonths’supplyofnewhomesavailablesinceApril2022.Thoughlistingsremainbelow2019levels,currentmarketconditionsfavorasmallgroupofmotivatedbuyerswhocontinuetobesqueezedbyinflationandrestrictivepol-icy.Futurepricecutsandbuilderincentiveswillbeneededtoclosesales.Simultaneously,homeownershipratesareexpectedtodeclineascurrentownersweighfuturecapitalneedsagainstfallingprices,purchasingpowerandsavings.Short-terminvestorswillbeenticedelsewheretolimitlossesorpursueotheropportunities.

.Homebuildersandbuildingproductmanufacturerswilllookforcostsavingsmeasurestodelivermoreaffordableproducts.Asthecurrentdevelopmentpipelinenearscompletioninthesummer,jobswillbeshed,andbuildersarelikelytoshifttolower-costhomesandhigh-densityunits.Builderswillcon-tinuetoexperiencesupplychainissues,especiallywherehighdemandinnonresidentialandnonbuildingsectorsoverlapswithkeyinputs(e.g.,concrete,mechanical,electricalandplumbingsystems).Onebrightspotistheexpandingsin-gle-familybuilt-for-rentmarket.Thoughsmall,arapidincreaseinstartsin2022andoccupancyratesnearing95%suggestthatthesingle-familybuilt-for-rentsegmentremainsunderserved.

11

FMI2023ENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

MULTIFAMILYRESIDENTIAL

DRIVERS:

rate

Unem

ployment

19%

CoreCPI

Income

.Mortgagerates

.Homeprices

.Housingstarts

Housi

ngpermits

$128BILLION

2022/2021Comparison

2001--

FORECAST

2026

2023UP

8%$138B

2024DWN

-11%$123B

2025DWN

-10%$112B

2026STA

1%$113B

.Demandformultifamilyconstructionisexpectedtoberesil-ientovertheforecastperiodduetocurrentmonetarypolicies,highpurchasingcostsandaweakenedconsumerbase.Mar-ketdynamicsthatincludehigherborrowing,maintenanceandotherlivingexpenseswillcreateatemporaryperiodthatwillmotivatewould-befirst-timebuyersintorentalsforlongeruntilhomepricesarebetteralignedwithincomes.Further,hybridworkingandexpectedrisesinunemploymentratessupportfuturedemandforrentals.

.Constructionspendingisexpectedtodropbrieflyinto2024and2025.AsofNovember,thereweremorethan900,000newunitsindevelopment;andwithrentgrowthexpectedtoslowin2023,manymultifamilydeveloperswillshifttheirfocustowardlower-priced,high-densityorsuburbanunitstoofferaffordablerentaloptions.Supplychain,profitabilityandproductivityissueswillcontinuetolimitactivity,thoughmanyareexpectedtoinnovateandinvestintonewdeliverymodelssuchasincreasingmodularandprefabricationpractices.

.Age-targetedandage-restrictivecommunitiesareexpectedtogainshareandevolve,creatingnewdemandforrentalsthatdifferentiatebetweentheneedsofyoungerandolderpeople.Senior-focusedcommunitieswilllikelydrivethismarketastheytargetthoselookingtocapitalizeontheequitytheyhaveintheircurrenthomes.

IMPROVEMENTS

DRIVERS:

.Unemploymentrate

16%

CoreCPI

Income

.Mortgagerates

.Homeprices

.Housingstarts

.Housingpermits

$309BILLION

2022/2021Comparison

2001

2026

FORECAST

2023DWN

-8%$284B

2024DWN

-11%$252B

2025DWN

-2%$246B

2026STA

4%$257B

.Improvementspendingisexpectedtoenteramultiyearperiodofdeclinebetween2023and2025.Thosedeclines,however,willbemodestcomparedtothevolatilityinnewsingle-familyormultifamilyconstruction.Homeownerstypicallyspendthemostonimprovementsandrenovationsinpreparationforasaleorjustafterpurchasinganewhome.Futurecontractionistheresultofbuyersoptingtostayinplaceduetolocked-inlowinterestrates,thoughspendingwillbecounterbalancedagainsttheuseofimprovementsasanalternativetomovingup.

.Inprioryears,homeownersutilizedimprovementprojectsasaninvestment.Butfrom2023to2025,thoseconsiderationswillbechallengedashomepricesfall,purchasingpowerisreduced,andunemploymentrises.Contractorsandbuildingproductmanufacturerswillneedtoconsiderhoweconomicpressuresoftenencourageconsumerstofindmorecost-effec-tivewaystocompletehomeprojects,whetherthat’sdoingitthemselvesorbuyinglessexpensiveproductsinsteadofluxuryoptions(i.e.,smartfixtures,PVCtimberalternatives,tile,etc.).

12

FMI2023ENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

NonresidentialConstruction

PutinPlace

COMPOUNDANNUALGROWTHRATE(2021THROUGH2026)

1%

TotalNonresidentialConstructionSpendingPutinPlace

2021andForecastGrowth(2021through2026)

byConstructionSegment

10%

8%

6%

4%

2%

0%-2%-4%-6%

-8%

Manufacturing

WaterSupply

HighwayandStreet

Sewageand

Transportation

WasteDisposal

Conservation

andDevelopment

Communication

HealthCareEducational

CAGR2021-2026

4.

PublicSafety

Lodging

Power

AmusementandRecreation

Commercial

.Religious

Office

$0$25$50$75$100$125

CONSTRUCTIONSPENDINGPUTINPLACE2021(BILLIONSOFU.S.DOLLARS)

SOURCE:FMIFORECASTQ12023

14

FMI2023NORTHAMERICANENGINEERINGANDCONSTRUCTIONINDUSTRYOVERVIEW

NRCISCORE

46.4

(Scoresabove50indicateexpansion;scoresbelow50indicatecontraction)

46.3

NonresidentialConstructionIndex(NRCI)

Q12011toQ12023

CurrentNRCIReadingforQ12023

(December1-16)

Q12023Score

70

60

50

40

30

20

10

0

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1-Q4

Q1

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

HCCIINDEXMOVEMENT

Q12023

Q42022

OverallU.S.Economy

38.5

38.6

EconomyWhereWeDoBusiness

42.0

45.7

OurEngineeringandConstructionBusiness

60.0

62.0

Engineerin