Building construction industry

Industry Snapshot

GENERAL INDUSTRY: Architecture and Construction

CAREER CLUSTERS: Architecture and Construction; Manufacturing

SUBCATEGORY INDUSTRIES: Commercial and Institutional Building Construction; New Multifamily Housing Construction; New Single-Family Housing Construction

RELATED INDUSTRY: Building Architecture Industry

ANNUAL DOMESTIC REVENUES:US$79.6 million (residential building construction, including homes and apartments and condominiums; IBISWorld, 2023); US$26.5 billion (industrial building construction; IBISWorld, 2023); US$271.3 billion (commercial building construction; IBISWorld, 2023); US$235.2 billion (municipal building construction; IBISWorld, 2023); US$110.2 billion (residential remodeling; IBISWorld, 2023)

NAICS NUMBER: 236

Summary

The building construction industry deals with not just the construction of new buildings but also the alteration, maintenance, and repair of existing buildings. Projects range from skyscrapers to prefabricated and temporary structures. Building construction also covers integral structural services equipment, such as plumbing, heating, central air conditioning, electrical wiring, lighting equipment, elevators, and escalators.

An owner wishing to construct a building hopes to achieve a finished project that meets the owner's functional requirements and expectations for design and quality at the lowest possible cost and on a predictable schedule. A general contractor offering construction services hopes to produce quality work, earn a profit, and complete the project in a timely fashion. However, the building process is full of uncertainty. It is subject to the movements of the labor market, commodity prices, and the weather. Despite the best planning efforts, delays occur and mistakes are made. The pressures of schedule and cost inevitably minimize the margin for miscalculation. In this high-stakes environment, the relationship between the owner and contractor must be structured to share reasonably between them the potential rewards and risks.

History of the Industry

The building construction industry in the United States has made tremendous strides since the mid-twentieth century. Evolutionary tools and mechanized earth-moving equipment have lifted it from pick-and-shovel primitiveness to a high degree of sophistication. Site development has become a science in itself, demanding the expertise of civil engineers as well as highly skilled operators of large and expensive equipment. Maintenance of this equipment alone can be a profitable and rewarding business on its own.

The cement industry also has contributed to this progress, as can be seen in modern buildings such as skyscrapers and airway terminals. Building these structures quickly was made possible by the development and use of component parts. For example, new factories use refinished walls, new offices use outside panels hoisted in place, and new commercial or industrial buildings use inside curtain walls. Refinished applications are not limited to nonresidential use; much of the systems development is employed in residential construction, and this use will certainly increase in the future.

Modern buildings are very different from those constructed at the beginning of the twentieth century. Even a commercial or residential building erected only three or four decades ago is, in most cases, functionally obsolete by modern standards. There are more insulation, better drainage, and greater variety of materials and equipment that did not exist in the early twentieth century, including garbage disposals, trash compactors, dishwashers, clothes washers and dryers, air conditioners, humidifiers, air-filtration systems, and multiple garages.

Production engineering management of the construction process also has been an integral part of this development. The critical path method, a technique that enables the user to think through a problem and create a logical, precise plan for its solution, has allowed the planning of complex structures and building with efficient sequencing.

Finally, great improvements have been made in material handling and packaging. For example, structural parts are stacked, wrapped, or taped in such a way that the parts flow readily into use from first to last. The entire package can be moved from truck to truck to floors of the structure by machinery. This process, of course, requires heavy machinery and skilled operators. Consequently, whole sections of a structure are now handled mechanically and put in place on the site. Builders use forklifts, trucks, carryalls, bulldozers, tractors, graders, power shovels, backhoes, trenching wheels, and drilling and hole-boring equipment. On a smaller scale, they also use electric saws, drills, staplers, routers, planers, nailing machines, electric power mixers, concrete and paint spray guns, small portable lifts, chain saws, and many other power tools to perform the many tasks involved in a construction project.

The Industry Today

The focus of the building construction industry is the same as it always has been: the building of structures for human habitation or other uses. The exact manner in which building construction is accomplished is changing in response to several factors: construction becoming an economic indicator, city expansion and services, new complexity of projects, and green design and construction.

The building construction industry, like most major cities, is a sprawling economic machine. The majority of construction spending is done by private individuals and businesses for work on physical structures such as homes, stores, mills and factories, airports, power plants, public works, and defense installations. These building types have come to be an exercise in economic expansion. The building construction industry is directly linked to the financial system, which provides the capital in the form of loans for projects. This has become a key factor in the growth of the construction industry and has evolved into a speculative economic indicator. New-construction figures have become a standard by which to gauge the nation’s economic well-being. Effectively, the nation’s banks, insurance companies, pension plans, and other financial institutions have a major stake in the building construction industry.

The country is continually forced to make major repairs to its infrastructure—highways, tunnels, bridges, dams, schools, power plants, water and sewer systems, subways, and airports—which ensures the widespread availability of employment in highway and heavy construction work. Construction is one of the largest industries in the world. Because of the continuous expansions of cities, the number of jobs in the construction industry is projected to rise steadily, compared with the slower growth that is projected for many other industries. This growth also depends on the level of construction and remodeling activity, which is expected to increase. Consequently, employment is also growing in specialty trade contracting, the largest segment of the overall construction industry, as a result of the demand for subcontractors in light and heavy construction and for workers to repair and remodel existing homes. The industry suffered during the 2020 COVID-19 global pandemic, with construction sites shutting down and supply chains being disrupted but rebounded after this, with revenue in 2022 at $2.7 trillion.

In addition to the increased number of municipal projects, the projects themselves have grown in both size and complexity. Laws have set higher standards for building and construction materials, worker safety, energy efficiency, and pollution control and are being addressed by skilled professionals with expertise in construction science, engineering, and management. Construction managers—those who oversee projects and ensure that laws and regulations dealing with construction, safety, and the environment are upheld—are in high demand. The field is expected to grow faster than average through 2028.

Environmentally conscious practices have emerged as a growing trend in the building construction industry. “Green construction” has been defined by the US Environmental Protection Agency as “the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life cycle, from siting to design, construction, operation, maintenance, renovation, and deconstruction.” Green construction has changed the industry, creating new project possibilities and new roles to fill. Sustainable construction seeks to reduce a project’s negative effects on the environment and on the health and safety of construction workers, thereby improving construction performance. This trend has opened the door for unprecedented collaboration among architects, building owners, and construction companies. Basic objectives such as reducing consumption of nonrenewable resources, minimizing waste, and creating safe, productive environments for workers are changing the traditional process of building new homes and buildings. In some cases, a construction company is required to have green construction experience before it can be granted a contract.

Industry Outlook

Overview

The 2007–9 recession resulted in a significant downturn in the construction industry. In 2012, overall industry employment was down 29 percent from its peak in April 2006, with residential building construction employment in particular showing a dip of 42 percent. However, by 2015, the industry had mostly recovered and was showing small but steady annual growth. In November 2014, Dodge Data & Analytics predicted a 9 percent increase in construction starts for 2015. FMI similarly predicted a growth rate of 8 percent; while that estimate was later revised to 5 percent, the lower figure still represented the highest total spending on construction put in place since 2008.

Though still evolving, the construction industry is expected to continue to be an excellent source of job opportunities, especially for skilled tradespeople, due to the large number of anticipated retirements and the lack of individuals with applicable education and experience entering the skilled trades. Even in times of economic recession, it is rare for all segments of the construction industry to struggle simultaneously, so workers often are able to switch from building homes to building offices, or vice versa, depending on demand. According to the Bureau of Labor Statistics, construction and extraction occupations were projected to increase by 4 percent from 2022 to 2023.

Employment in specialty trade contracting, the largest segment of the construction industry, is expected to grow fast as well, as demand increases for subcontractors in building and heavy construction and as more workers are needed to repair and remodel existing homes. Home improvement and repair construction is expected to continue to grow faster than new-home construction. Remodeling is a sector that is likely to continue growing because of the abundance of old or aging residential and nonresidential buildings. Many older, smaller homes will be remodeled to appeal to more affluent buyers; remodeling tends to be more labor intensive than new construction. In addition, the construction industry increasingly is contracting the services of specialty trade workers instead of keeping these workers on staff.

Employment growth will vary among occupations in the construction industry. Employment of construction managers is expected to grow as a result of the increasing complexity of construction work and the proliferation of laws dealing with building construction, worker safety, and environmental issues. An especially favorable job outlook is expected for individuals who have bachelor’s degrees in construction science with emphasis on construction management and related work experience in construction management services firms.

Employment Advantages

Careers in construction offer many advantages for people with diverse skills. Construction is a constantly changing industry because of evolution and variation in means of construction, costs of materials and resources, demographics, building uses, education, building laws, and human ecology. Construction also is a relatively easy field to enter. It is not mandatory to have a specific degree or training and, in many states, a contractor does not need to be licensed unless the individual practices a specific trade (for example, an electrician or plumber).

Annual Earnings

According to data from IBISWorld, the building construction industry had annual revenues of approximately $271.3 billion as of 2023. This high revenue gives the construction industry unmatched influence over the greater national economy.

The building construction industry has an ever-evolving relationship with the civil engineering and architecture industries as architects, engineers, and builders seek new forms of collaboration.

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