Construction Industry Outlook: What to Expect in 2017

Alex Wilson

Over the past few years, the construction industry has seen some profitable times, with a significant amount of new construction taking place throughout the state in both the residential and commercial sectors. Businesses are investing more in the infrastructure of their operations and are willing to expand and improve, which is driving the construction economy in the state.

Looking forward at the next three to five years, many experts think that the industry will slow down some to a more consistent level of growth, compared to the rapid growth we saw in the market over the last few years. A few key factors will lead to the decline in new-build projects:

  • Other sectors in the economy are not as strong, so new construction projects are not going to be as prevalent.
  • The international market is also seeing an economic slowdown, so new opportunities in the United States will not be as prominent.
  • Labor and financing issues will remain a factor, and even more so now with financial institutions believing the construction economy will slow.

It is still being forecast that 2017 will be a good year in the industry, but it will be crucial that construction companies start planning for a downturn.

Construction owners can employ strategies to ensure that they thrive going into the future.

  • First, finding good help is hard to do, but it may be just as hard to hold on to that help. Even though it will add more costs, keeping your employees well-compensated will serve your company well. This will keep efficiency high and allow the company to stay on track during projects.
  • Second, with lenders tightening on the financing for construction companies, it is vital to keep financial information as accurate as possible. Consistency in the way you estimate a contract will help keep cash flow strong. If you are finishing jobs with little change in the anticipated margin, the bottom line of the company will remain healthy, and lenders will be more likely to finance your operations.
  • Finally, keeping a cash flow reserve for the down times will be key in ensuring that your company endures any decline in the market, and this is another factor that lenders like to see when determining lending status.

In summation, 2017 is expected to be a fairly strong year in the Michigan construction sector, especially in urban areas and in the construction of rental complexes. Experts are forecasting that beyond this year, new construction will start to fall off as more industries start to return to a more stable growth. However, by utilizing the key strategies outlined above, you can ensure that your company will remain successful in any situation that arises in the near future.

Alex Wilson

Alex Wilson

CPA

Alex Wilson, CPA, provides tax and management advisory services with an emphasis on construction companies and agribusiness. He is a member of the firm’s Construction Services Group and the Agribusiness Services Group. He is a senior accountant in Yeo & Yeo's Saginaw office. Contact Alex via email at alewil@yeoandyeo.com or call 989.793.9830.