Raleigh-based FMI Corporation, which provides management consulting and investment banking services to engineering and construction, infrastructure and the built environment, believes there will be a healthy 5 percent growth in the South Atlantic construction market in 2017 but nowhere near the growth projected of 10 percent in the Mountain region and an incredible 13 percent in the Pacific area.
Overall, FMI says in its 2017 US Markets Construction Overview:
- The outlook for construction growth in 2017 continues to be positive for all market sectors;
- FMI expects a 1% increase in construction-put-in-place growth throughout the year (compared to the 5% increase in 2016);
- The total NRCI Index Score fell from 57.3 (third quarter 2016) to 56.9 in the fourth quarter of 2016. While the trend indicates a slower outlook for nonresidential construction, the Index is still solidly in positive territory, as it has been since the first quarter of 2012; and
- FMI’s key advice for 2017 is: “Plan for contingencies; execute based on the facts.”
“Looking ahead in 2017, there is cause for continued optimism for the North American E&C industry,” Chris Daum, FMI’s CEO, said in a statement. “However, beyond a sound economy and other traditional demand drivers, there is growing hype for a boom market in infrastructure spending, which to date is nothing more than speculation based on the new presidential administration. Our caution to clients is similar to the old Wall Street bromide, ‘buy the rumor and sell the news.’ Only in this case, we should all prepare for the possibility, but invest behind the facts.”
The South Atlantic region includes Florida, Georgia, South Carolina, Virginia, Delaware, West Virginia and Maryland as well as North Carolina.
In this market, FMI expects residential construction to increase by 3 percent this year, a deceleration from 11 percent in 2016. The largest growth areas in non residential buildings include lodging and office (9 percent each) with a notable increase in manufacturing (8 percent, reversing a 2 percent decline in 2016).
Overall FMI expects nonresidential building construction will increase in the South Atlantic area by 7 percent and non-building structures to increase by 6 percent.
FMI executives advise in their report that AEC practice leaders should be prudent in seeking out new opportunities, making sure not to lose or harm the areas where they have expertise and solid client relationships, in a dangerous search for growth and expansion.
“The companies that are just chasing opportunities tend to struggle the most,” said Ron Mangus, managing director, FMIs Center for Strategic Leadership. “Right now it’s a feast out here, and companies can’t control their own addictions to pursue new markets.
“They haven’t learned how to say ‘no’ and they get into trouble and wind up burning a lot of energy trying to get out of those predicaments – versus enjoying the ability to create a stronger equity base that establishes success for the future.”
In its report, FMI says that “if there’s one thing we all learned from the last recession, it’s that abandoning core and incumbent markets to chase the next best thing is NOT a sustainable growth strategy.”
“Instead, preserve your core business and take advantage of any market opportunities that open up when your competitors get distracted by chasing the next big thing. Keep your core markets, core services and core capabilities very strong, and stay loyal to your key clients,” the FMI report says. “It’s what you execute best on. Sustaining and expanding work with existing customers in known markets often leads to more sable business and better profits over time – regardless of external market dynamics.”
You can download the complete FMI US Markets Construction Overview here: