Throughout 2018, two sectors in the construction industry are seeing a positive fluctuation in revenue.
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Throughout 2018, two sectors in the construction industry are seeing a positive fluctuation in revenue. A recent article provided by The Equipment Leasing & Finance Foundation (ELFF) discusses the two sectors, residential and commercial, along with how each sector proves its confidence of continued growth and an increase in marginal spending. The article also challenges the effect of labor shortages and incorporates the strain of a new tariff. This tariff will make equipment more expensive and the effects it will have on growth are still mostly unknown.
RESIDENTIAL vs CONSUMER
With 2017 construction spending reaching an all-time high, it’s expected to see growth continue in 2018. This is because residential areas are becoming more desirable for Millennials as they move outside of cities and into suburban areas. Most Millennials (in the market to purchase a house) are currently looking to purchase a home with a yard. The only problem is making these types of homes affordable.
This move will increase residential growth and marginal spending by a total of nine percent this year. Commercial areas will also bring revenue. With updated arenas and airport renovation. However, this may not exceed the previous year’s growth due to a decrease in other areas such as hotels and lodging. This will decrease revenues in the near future, however, does not affect 2018 construction growth numbers.
POTENTIAL THREATS
The ELFF article determines that “there is little doubt a bump in materials costs resulting from imposed trade tariffs will have construction companies and developers realizing narrower margins.” This is largely in part because of the adaptation of new technologies. Although costs of steel and aluminum will increase, costs of labor and safety will decrease. Thanks to robots, drones, and other advancements we should also see an increase in productivity. As well, other studies have shown that U.S. employment rates are going up.
As a whole, the trade tariff(s) and said labor shortage will have minimal effects. We are still expecting to see growth and spending for construction throughout 2018 for (hopefully) another all-time high and a great opportunity for businesses to finance new equipment
