Since 2003, our Construction & Real Estate team has conducted an annual survey of the New York State construction industry. The information contained in this year’s report, New York Contractors 2024 State of the Industry Study, is designed to help construction industry executives in assessing their standing on various issues, including financial management techniques and economic outlook. Its aim is to provide an assessment of whether their organization is competitive among other local construction companies.
This study is made up of insights from over 100 respondents at construction companies and contractors representing four size categories: under $10 million in, $10 to $24.9 million, $25 to 49.9 million and greater than $50 million in revenue. However, most of the survey respondents fell under the $50 million threshold.
The respondents were evenly mixed throughout the main geographic areas across New York, including many “regional” businesses with multiple locations within New York and surrounding states.
Check out the below for a look into some of the key findings.
Contracts
Taking a dive into the construction industry requires an understanding of the contracts.
The overall breakdown between public and private sector work across all survey respondents revealed a decrease in the number of respondents performing primarily public work performed (48%) vs. those primarily performing private work (52%), compared to these amounts in the previous State of the Industry Survey. As can be seen from the past surveys, the amount of work from each source varies but consistently reverts to a 50/50 split. Whether that trend continues remains to be seen, but being flexible, such as working in both the public and private sectors, is important to sustain success.
Backlog is a sign of the economy and is an important statistic for construction companies to monitor. The data shows the construction industry continues to be a beneficiary of a strong economy in recent years with a majority of contractors (73%) responding that their backlog has either increased or remained the same compared to the previous year, an increase from the previous survey.
Profitability
Overall, companies were more profitable in 2023 compared to 2022 based on survey responses, likely due to the relatively stable construction demand over the past several years. However, management should not be focused only on being profitable, but continuing to improve the company’s profitability.
Improving profitability should be one of the highest priorities on any contractor’s radar screen. With a strong majority of the respondents being more profitable in 2023 (approximately 95%), it comes as no surprise that also a strong majority of respondents (88%) indicated that field productivity increased or remained the same from the previous year. For those respondents whose productivity declined, most indicated that it was a function of the lack of availability of skilled labor.
Critical Issues
The construction industry faces many challenges today. However, one critical issue continues to remain at the forefront: the scarcity of skilled labor. It remains a struggle to attract an adequate amount of skilled labor to meet current construction demands, with an aging workforce further compounding the problem. The majority of respondents experienced significant project delays due to this shortage or were unable to bid on multiple projects altogether. The workforce is aging at a rapid pace, so workforce development of younger workers holds greater importance for the industry than ever before. More construction companies are emphasizing the need to prioritize investment in training programs to replenish experienced talent. The survey shows that over 60% of companies have an internal training program in place and approximately 80% of companies believe that is important or extremely important to have one.
Other critical issues that the majority of respondents deemed to be important to the industry include the availability of financing, elevated material costs, supply shortages, governmental regulations, and the overall state of the economy within the industry.
Outlook for the Future
The economy is a main driver of the construction industry. Typically, the construction industry is on a one to two-year lag compared to other industries. This is attributed to the nature of when contracts are funded and awarded, as the construction industry relies on growth from both public and private sector investment. One sector alone is not enough to prop up the industry and with a lack of investment in one of the two sectors, contractors can feel the work dry up. Top priorities of construction companies for the future include finding and developing skilled labor, strategic / organizational planning, and succession planning. Overall, the industry remains strong despite the current challenges companies face with the lack of skilled labor and high interest rates.
To download the full study, check out our Accounting for Construction page here. And if you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out directly to Joseph Peresan at jperesan@bonadio.com or Nancy Cox, ncox@bonadio.com to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.