2018 Set a Construction Industry Record, But Can 2019 Keep Up?

For the architecture, engineering and construction industry, 2018 was a banner year where mergers and acquisitions were concerned. The AEC industry saw an increase in mergers and acquisitions of 23% last year, completing a record 387 deals, according to Nick Belitz of Morrissey Goodale in an article for Consulting-Specifying Engineer.

The previous record was 352 deals in 2016. The article mentioned several factors that drove the increased number of deals, including the obvious—a strong United States economy—and then more industry specific, such as the skilled labor shortage and challenges associated with succession planning and transition of company ownership. Below, find out how 2019 and beyond is shaping up, according to Dodge Data & Analytics.

How 2019 is Holding Up …

Last week, in Dodge Data & Analytics’ 2019 Midyear Update, Chief Economist Robert Murray reported that the growth the industry has seen throughout the past few years (largely from 2016 to 2018) has somewhat flattened out in 2019.

Murray said it’s evident that the industry is seeing a deceleration of growth in 2019, particularly in public works projects. However, whether the construction industry—and the overall economy—is heading for a recession or is just stabilizing remains to be seen. Economists expect to see a GDP growth rate of 2% following a strong 3.1% in Q1 2019 and a drop to a rate of 2.1% in Q2. Murray pointed to moves like relatively stable long-term interest rates and multiple construction bond measures passed by state and local municipalities as positive signs for the industry as a whole.

But he also mentioned continuing factors, such as trade tensions with China, ever-increasing materials prices and the labor shortage, putting additional stress on the industry could lead to a slower economy in Q4 of 2019 and on into 2020. According to the forecast, commercial and multifamily sectors will be impacted first by a slower economy.

In terms of total U.S. construction starts to date in 2019, Dodge reports moderate decreases and increases (from 1% to 11%) in all sectors but one—electric utilities and gas plants increased 62%—which has led to an overall decrease of 1% for total starts. The good news? Murray predicts that a potential slowdown in 2020 would likely be relatively modest. Click here to listen to the full playback of the forecast.

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