Construction Industry Sees Growth Ahead

While construction companies continue to face supply chain disruption as a result of the pandemic, these companies are more optimistic (56%) than the national average (52%), expecting overall economic conditions in the U.S. will improve, according to a new study from Umpqua Bank.

 

The survey clearly shows that construction firms tend to see improving finances in the year ahead. About 66% said they expect revenues to increase, compared with an average of 55% for all sectors, and only behind that of retail (67%). The construction industry also expects profits to rise, with 52% saying so, compared with an average of 45%, and trailing only retail (67%) and manufacturing (57%).

The findings are part of a 2021 Business Barometer report just released by Umpqua Bank that provides an in-depth study into the mood, mindset and strategic priorities of nearly 1,200 leaders at small and mid-size companies across the United States. The survey breaks down results into seven major industries.

Construction firms also said they will continue to retool their approaches over the next year. Remarkably, 73% said they plan to make significant changes to pricing, more than any other sector, with the others trailing well behind, such as manufacturing (50%), business services (49%), and wholesale (48%). About 34% said they are likely to take on debt to grow in the coming 12 months, versus 29% of all those polled. About 31% are considering increasing their real estate footprint, similar in inclination to other industries (32%).

“Construction firms of all sizes have shown remarkable resilience during the pandemic, and generally appear optimistic about the economy and their prospects for growth,” says Richard Cabrera, executive vice president and head of middle market banking at Umpqua Bank. “They have faced volatile commodity prices and labor shortages, but strong demand for real estate, such as housing and warehouses, has allowed operators to pass much of the rising costs on to buyers.”

Like many enterprises, businesses in the construction industry have made changes and adapted in response to the pandemic. However, they are less like than other business to keep changes made long term: Only about 37% of firms said they will maintain most or all of the changes they put in place since March of last year, the lowest among all sectors in the study. The national average was 54%.

Some other key takeaways from the survey:

  • About 95% of the construction industry said they had supply issues over the last 12 months, compared with an average of 88% for all sectors.
  • Roughly 20% of construction firms said they are more likely to acquire another business in the coming year, versus 26% of all companies. Only healthcare had a lower number, at 15%. Business services and wholesalers were the most likely to acquire, both polling at 34%.
  • Only 33% of construction firms said they would likely automate repetitive tasks over the next year, well below the average of 44%, but 58% they would look for ways to digitize the business to improve efficiency, in line with the average of 59%.

“We see very encouraging signs despite some macroeconomic adversity,” Cabrera says. “We’re likely going to see strong growth in construction for the foreseeable future, thanks to strong demand and the push to upgrade the nation’s infrastructure. We’re just getting started.”

Read the full Umpqua Bank 2021 Business Barometer here.

Survey Methodology
The Umpqua Bank 2021 Business Barometer, conducted annually, surveyed 1,196 owners, executives, and financial decision-makers from U.S. small and middle market companies. The online survey was conducted in partnership with DHM Research, a public policy and business research firm, and targeted executives at companies with $500,000 to $500 million in annual revenue. The survey has a 2.8% margin of error and was fielded from May 24 – June 4, 2021.

About Umpqua Bank
Umpqua Bank, headquartered in Roseburg, Ore., is a subsidiary of Umpqua Holdings Corporation, and has locations across Idaho, Washington, Oregon, California and Nevada. Umpqua Bank has been recognized for its innovative customer experience and banking strategy by national publications including The Wall Street Journal, The New York Times, BusinessWeek, Fast Company and CNBC. The company has been recognized for eight years in a row on FORTUNE magazine’s list of the country’s “100 Best Companies to Work For,” and was recently named by The Portland Business Journal the Most Admired Financial Services Company in Oregon for the sixteenth consecutive year. In addition to its retail banking presence, Umpqua Bank also owns Financial Pacific Leasing, Inc., a nationally recognized commercial finance company that provides equipment leases to businesses.

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