Construction Sector Defies Rising Costs and Interest Rates, Continues Upward Trend
The Marcum Commercial Construction Index for the first quarter of 2024 reports that the construction industry continued growing despite various challenges. The index is produced by Marcum’s National Construction Services group.
The construction industry continues to benefit from massive investment in manufacturing structures. “Construction spending on manufacturing structures is up 184% over the past four years,” said Anirban Basu, Marcum’s chief construction economist and report author. “Given the size of many of these projects and ongoing efforts to strengthen the nation’s semiconductor, clean energy and electric vehicle production capacity, the manufacturing-related construction segment will retain momentum through the entirety of 2024.”
Input prices, after remaining relatively flat throughout 2023, resumed rising during the first quarter. “Prices for inputs to construction increased sharply in March,” said Basu. “This is partly due to global supply chain issues, with new bottlenecks arising in the Red Sea, the Panama Canal and the Port of Baltimore.”
In addition to rising input prices, the industry must grapple with higher-for-longer interest rates. “The year’s first quarter has squashed any hopes of imminent interest rate cuts,” said Basu. “Inflation has accelerated and now appears to be stickier than anticipated. Most forecasters now expect one rate cut at most in 2024, and not until the end of the year.”
Despite higher interest rates and rising material costs, the industry continues to expand. “The construction industry added jobs for the 13th straight month in March,” said Basu. “Nonresidential construction has added jobs at a particularly rapid pace lately, with employment in the category up 5.5% over the past year. That compares favorably to both the broader construction industry (up 3.2% year over year) and all industries (up 1.8%).”
Unfortunately, rapid employment growth has come with rapid wage increases. “Average hourly earnings for construction workers are up 5.2% over the past year, well above the 3.9% increase observed across all industries,” said Basu. “Higher wages put upward pressure on construction costs, exacerbating the effects of high interest rates and tight lending standards.”
While the overall industry will likely retain momentum throughout 2024 due to strong manufacturing- and infrastructure-related construction activity, others may struggle. “As project financing becomes increasingly difficult to secure, certain segments, including those not boosted by infrastructure on manufacturing-related federal programs, will struggle,” said Basu.
Marcum’s national construction leader, Joseph Natarelli, said, “I continue to be encouraged at the resilience and momentum our industry has showcased, particularly in the manufacturing sector, where spending has surged dramatically. While we navigate through the challenges of rising input costs and persistently high interest rates, it is crucial for construction businesses to maintain a vigilant approach to cost control and financial planning. Securing project financing has become a competitive edge in this current climate. Companies should also invest in efficiency and innovation to mitigate the impact of increased wages and input prices. Our industry is robust and growing, but success will largely depend on strategic foresight and the agility to adapt to the economic landscape.”
Construction Materials Prices Decrease in May for the First Time Since December
Construction input prices decreased 0.9% in May compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released June 13. Nonresidential construction input prices decreased 0.8% for the month.
Overall construction input prices are 2.1% higher than a year ago, while nonresidential construction input prices are 2.2% higher. Prices decreased in two of the three energy subcategories last month. Crude petroleum prices were down 8.7%, while unprocessed energy materials prices decreased 6.6%. Natural gas prices were up by 1.7%.
“For contractors, this data provides excellent news along two fronts,” said ABC Chief Economist Anirban Basu. “First, construction input prices fell for the first time since December and, despite rising somewhat sharply over the first four months of 2024, are up just 2.1% year over year. Second, the Producer Price Index’s economy-wide measure of final demand prices fell in May. This, along with yesterday’s [June 12] cooler than expected Consumer Price Index data, signals slowing inflation and that the Federal Reserve may begin to cut rates sooner than expected. With contractor confidence regarding profit margins at the lowest level in seven months according to ABC’s Construction Confidence Index, falling materials prices and the prospect of lower interest rates in 2024 are welcome developments for the construction industry.”
Business for Sale by Owner: Most profitable companies in the construction industry (July 2024)
1. Premier Windows & Doors, Roofing, HVAC & Solar Company:
This premier multi-million-dollar company has been serving the South Florida market since 2017, priding itself on exceptional customer service and high professional standards of work. Unlike much of its competition, the Company offers a range of services, including windows, doors (70%), roofing (25%), solar, and HVAC (5%) to residential homeowners. Its premium location is situated at the epicenter of one of the fastest-growing population centers in the country, allowing the Company to serve a broad geographical community with room for growth. The operational structure, with no warehousing of products and a sales team who visit customers in their homes or businesses, makes it easy to relocate throughout the area. With over $10 Million in orders consistently in the project pipeline, the company comes with an experienced and licensed operational, sales, and installation team. The Company has existing relationships with trusted suppliers and uses processes that eliminate warehouse and showroom needs and costs, resulting in an efficient operation with lower overhead and higher margins.
Details:
- Location: Miami-Dade County, FL
- Asking Price: $33,500,000
- Gross Revenue: $33,685,475
- Cash Flow: $6,710,314 (Seller's Discretionary Earnings)
- EBITDA: Not Disclosed
- Inventory: $200,000 (included in asking price)
- FF&E: $220,000 (included in asking price)
Key Aspects:
- Diverse Services: Offers windows, doors, roofing, solar, and HVAC services.
- Prime Location: Situated in a high-growth area, serving a broad geographical community.
- Efficient Operations: No warehousing or showroom needs, leading to lower overhead.
- Experienced Team: Skilled operational, sales, and installation team.
- Strong Pipeline: Over $10 million in orders consistently in the pipeline.
- Reputable Supplier Relationships: Long-standing relationships with trusted suppliers.
- Preferred Provider: Largest preferred provider for the PACE finance program in the region.
- Government Incentives: Benefiting from new government programs encouraging energy-efficient home improvements.
Opportunities:
- Geographic Expansion: Potential to grow through geographic expansion.
- Increased Demand: Rising demand due to demographic growth and high ROI from home renovations.
- Government Programs: Leverage new government incentives for energy-efficient home improvements.
- Scalable Operations: Easy to relocate and expand operations throughout the region.
Headquarters and Real Estate:
- Building SF: 5,600
- Real Estate: Leased
- Rent: $12,220 per month
Current Markets:
- Service Area: Serving residential homeowners in South Florida.
Shareholder Objectives:
- Reason for Selling: Other interests
- Training/Support: Four weeks at no cost
- Seller Financing: $3.35M @ 6% for 36 months = $101,913/month
This business is a unique investment opportunity in the thriving South Florida market. With its established presence, efficient operations, and significant growth potential, it represents an excellent prospect for buyers looking to enter or expand in this sector. Prospective buyers should contact the seller directly to learn more and explore this exciting opportunity.
2. Tech First Design-Build Construction Co:
Enter the forefront of California's real estate market with this exceptional opportunity to acquire a leading Design-Build construction company based in San Francisco. This company stands as a premier provider of comprehensive construction solutions, boasting a robust revenue stream and an impressive portfolio of secured contracts. With a solid foundation and experienced management team, this company is poised for substantial growth in the highly competitive construction industry.
- Location: San Francisco, California
- Asking Price: $22,500,000
- Sales Revenue: $13,000,000
- Cash Flow: $5,000,000
- EBITDA: $3,350,000
- FF&E: $1,100,000 (included in asking price)
- Inventory: Not Disclosed (included in asking price)
- Real Estate: Not Disclosed
Business Highlights:
- Establishment: Founded in 2014, this company has swiftly risen to prominence as a leader in the Design-Build construction sector in California.
- Services: Specializes in combining architecture, design, and construction services, providing custom installations that meet high standards of efficiency and quality.
- Clientele: Known for its prestigious clientele and secured contracts totaling over $7 million for the upcoming year, reflecting a strong net margin of 30%.
- Management Approach: Emphasizes employee empowerment and ownership, fostering a culture of excellence and operational efficiency.
- Market Position: Positioned to capitalize on the growing demand for customized, technologically integrated residential construction solutions.
Business Operation:
- Expansion Potential: Projected to continue its strong growth trajectory with ample room to expand operations and market share.
- Unique Business Model: Offers a blend of architectural, design, and construction expertise under one roof, distinguishing itself in a competitive marketplace.
Reasons for Selling:
- Owner's Vision: The owner seeks an experienced buyer to propel the business to the next level, focusing on scaling commercial operations and leveraging the company's established market position.
Employees: Currently, the company employs 23 skilled professionals dedicated to delivering high-quality construction projects.
Support & Training:
- Comprehensive support and training provided to ensure a seamless transition for the new owner.
Relocatable:
- Flexibility for relocation, offering strategic advantages for operational optimization and market expansion.
This listing presents a rare opportunity to acquire a thriving, forward-thinking construction company with unparalleled growth potential in the dynamic San Francisco market. Serious offers based on industry comps are welcomed, offering the chance to lead the charge in shaping the future of the construction landscape. For further details and inquiries, prospective buyers are encouraged to engage with the seller promptly.
3. Profitable Underground Utility Business:
Underground utility company specializing in sitework, including stormwater drainage systems, sanitary sewer piping, pump stations, and water supply lines. Their principal market is the state of Georgia, with the current office located in a North Atlanta metro county. This well-established business, with a 12-year record, offers a solid foundation for continued growth in a booming industry.
Details:
- Location: Fulton County, GA
- Asking Price: $18,500,000
- Gross Revenue: $26,248,941
- Cash Flow: $3,197,289 (Seller's Discretionary Earnings)
- EBITDA: Not Disclosed
- Inventory: Not Disclosed
- FF&E: $3,000,000 (included in asking price)
- Real Estate: Not Disclosed (included in asking price)
Key Aspects:
- Specialization: Focuses on sitework, stormwater drainage, sanitary sewer piping, pump stations, and water supply lines.
- Market: Principal market is the state of Georgia.
- Customer Base: Diverse, high-net-income customer base with significant repeat business.
- Reputation: Excellent reputation in the markets served.
- Backlog: Impressive project backlog.
- Market Sector: Serves builders, developers, commercial entities, and municipalities.
- Growth Forecast: Industry sales forecast to grow at a 5.32% compounded annual rate from 2021 to 2026.
Opportunities:
- Market Expansion: Potential to expand services beyond Georgia.
- New Markets: Explore opportunities in new construction and replacement of utilities.
- Technology Integration: Implement advanced technologies to improve efficiency.
- Customer Base Expansion: Increase customer base within the existing market sector.
Headquarters and Real Estate:
- Facilities: Owned, with very good general condition of FF&E.
Current Markets:
- Service Area: Principal market is the state of Georgia, with potential for expansion.
Shareholder Objectives:
- Reason for Selling: Retirement
- Support & Training: 4 weeks
This business represents a prime opportunity to invest in a growing and profitable sector. With a solid customer base, excellent reputation, and significant growth potential, it is well-positioned for continued success. Prospective buyers should contact the seller directly to learn more and explore this exciting opportunity.
4. Mechanical Contracting Company:
Reliable and reputable mechanical contracting company serving commercial and industrial clients throughout Alaska for over 20 years. Their commitment to excellence has fostered strong relationships with clients, industry partners, and community members.
Details:
- Location: Alaska
- Asking Price: $14,500,000
- Gross Revenue: $10,551,399
- Cash Flow: $2,721,834
- EBITDA: $3,530,000
- Inventory: Not Disclosed (included in asking price)
- FF&E: $490,177 (included in asking price)
Key Aspects:
- Established Business: Over 20 years in the industry with a strong reputation.
- Financial Performance:some text
- Three-year average SDE: $3,806,993 (2020-2022)
- Three-year average EBITDA: $3,467,107 (2020-2022)
- Growth Projections: 2023 revenue projected to reach $14M with a $4.2M NOI.
Opportunities:
- Market Expansion: Potential to expand services throughout Alaska.
- Growth in Construction: Significant growth expected in construction and retrofit work.
Headquarters and Real Estate:
- Facilities: Leased space with rent of $1,300 per month.
- FF&E Condition: Good, includes vehicles, tools, and other equipment.
Current Markets:
- Clientele: Serves commercial and industrial clients in Alaska.
Shareholder Objectives:
- Reason for Selling: Other interests.
- Support & Training: 4 weeks of training provided.
This business represents a prime investment opportunity with strong financials, established clientele, and significant growth potential. Prospective buyers should contact the seller directly to learn more and explore this exciting opportunity.
5. Construction Management Company:
Providing quality projects on time and high-quality customer service, the Company has created a path to “yes” regardless of the task or project. Specializing in commercial, industrial, corporate, and healthcare remodeling and maintenance, the Company has grown into a nationally recognized resource in the renovation construction space. The company boasts of T12M EBITDA of more than $3M with sustainable EBITDA north of $2.2M on $10M+ of annual revenue. The company’s niche and reputation for quality allows it to deliver margins that are rarely seen in the industry.
Details:
- Location: Boston, MA
- Asking Price: $7,000,000
- Gross Revenue: $10,000,000
- Cash Flow: $2,475,000
- EBITDA: $3,000,000
- Inventory: Not Disclosed
- FF&E: Not Disclosed
- Real Estate: Not applicable, primarily operates remotely.
Key Aspects:
- National Reach: Specializes in commercial, industrial, corporate, and healthcare remodeling and maintenance.
- High Margins: Delivers margins rarely seen in the industry due to niche and reputation for quality.
- Financial Performance: Consistently high EBITDA and strong revenue.
- Flexible Operations: Primarily remote operations with strategic storage spaces.
Opportunities:
- Business Development: Investing in a dedicated business development position to further drive growth.
- Strategic Bidding: Focuses on projects with limited competition to ensure high success rates.
Headquarters and Real Estate:
- Facilities: Utilizes two spaces for storing surplus materials, tools, and equipment.
Current Markets:
- Clientele: Nationally recognized with projects across the U.S.
Shareholder Objectives:
- Reason for Selling: Sellers wish to retire.
- Support & Training: Sellers will work with the buyer for three months, and up to six months as on-call consultants, or as negotiated.
This construction management company represents an exceptional investment opportunity with its established reputation, high margins, and national reach. Prospective buyers should contact the seller directly to learn more and explore this exciting opportunity.
6. Heavy Equipment Corporation:
Active and running heavy equipment corporation specializing in grading and excavations. The business holds all necessary contractor licenses (A, B, HAZ) and has $600,000 in active job contracts. This is a turnkey opportunity with extensive equipment and a solid revenue stream.
Details:
- Location: Alpine, California (San Diego County)
- Asking Price: $4,000,000
- Gross Revenue: $2,500,000
- Cash Flow: $2,000,000
- EBITDA: $400,000
- Inventory: $2,000,000 (included in asking price)
- FF&E: Not Disclosed (included in asking price)
- Real Estate: Leased
- Building SF: 5,000
- Rent: $3,000 per month
- Year Established: 2008
Key Aspects:
- Licenses: Holds active A, B, and HAZ contractor licenses.
- Equipment: Includes 30 pieces of heavy equipment and 20 Peterbilt trucks.
- Current Contracts: $600,000 in signed contracts.
Opportunities:
- Market Expansion: Potential to expand services and client base.
- Increased Contracts: Leverage existing contracts to secure more jobs.
Headquarters and Real Estate:
- Facilities: Leased space of 5,000 sq. ft.
Current Markets:
- Clientele: Serves various construction and excavation projects in the region.
Shareholder Objectives:
- Reason for Selling: Owner wishes to retire due to age.
- Support & Training: Seller financing possible.
This corporation offers a lucrative investment with substantial assets and established contracts. Prospective buyers should contact the seller directly to learn more and explore this opportunity.
7. Commercial Construction Company:
A great opportunity to acquire a well-established commercial construction business in Cleveland, OH, with a loyal customer base and an enviable reputation built over three decades. The company handles primary projects ranging from $500K to $5M and additional projects from $5M to $30M.
Details:
- Location: Cleveland, OH
- Asking Price: $5,250,000
- Sales Revenue: $39,000,000
- Cash Flow: $1,850,000
- Working Capital: ~$1 million included
- Real Estate: Lease
- Owner Involvement: Full-time; not suitable for absentee ownership
- Experience Required: Commercial construction management experience
Key Aspects:
- Revenue Projections:some text
- 2024 forecast: $42,000,000
- 2023: $39,000,000
- Cash Flow Projections:some text
- 2024 forecast: $2,100,000
- 2023: $1,850,000
- Work in Progress: $39 million+
- Backlog: $10 million+
- Sales Pipeline: $225 million+ active, $400 million+ inquiry stage
- Leadership and Team: Seasoned leadership team will remain, excellent employee retention rate
- Company Culture: A key differentiator from the competition
- History: 25+ years in business
- Customer Base: Long-term repeat commercial customers
- Capital Expenditures: Virtually none required
- Competitive Position: High barriers for new competitors
Opportunities:
- Expand Customer Base: Continue leveraging long-term relationships.
- Increase Market Share: Utilize seasoned leadership to pursue larger projects.
Headquarters and Real Estate:
- Facilities: Leased
Current Markets:
- Clientele: Commercial customers
Shareholder Objectives:
- Reason for Selling: Owner looking to retire
- Support & Training: Provided as needed to ensure a smooth transition
This commercial construction company represents an excellent investment with its solid financial performance, strong market position, and growth potential. Prospective buyers should contact the seller directly to learn more and explore this exciting opportunity.
Conclusion
To wrap up, these business opportunities within the construction industry in Virginia, Alaska, and California showcase diverse sectors ripe for investment. Each listing offers a chance to acquire a well-established business with robust client bases and significant growth potential. Investors can benefit from stable revenues, comprehensive support, and training, ensuring a smooth transition into ownership and fostering ongoing success.
Prospective buyers are encouraged to engage directly with sellers to explore these opportunities further, delve into financial details, and understand operational specifics. These listings provide a gateway to enter or expand within the competitive construction market, presenting an excellent path towards entrepreneurial success. Act decisively to seize these opportunities and secure your position in thriving industries.
>> Learn more about how to achieve your business purchase goals <<
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