The 2007 Industry Outlook for Design and Construction Firms

By Consulting Specifying Engineer Staff December 21, 2006

Health care, higher education and water/wastewater will be among the hottest markets for design and construction firms in 2007, while the parks and recreation, government and financial markets are expected to struggle, according to the 2007 AEC Industry Outlook: Strategy and Insight for Design & Construction Firms, a new report from Natick, Mass.-based A/E/C consultants ZweigWhite.

The architecture, engineering and construction business has outperformed the U.S. economy as a whole in recent years, and the majority of firm leaders surveyed in conjunction with the report remain optimistic about the industry’s performance heading into 2007. The survey found that 55% of respondents expect the A/E/C industry will outperform the U.S. economy in 2007, while only 12% expect the industry to lag.

”Despite a slight eroding of confidence in the performance of the A/E/C business heading into 2007, resulting from increased materials costs and other obstacles, the majority of firm leaders (57%) still project their business will be ‘outstanding’ or ‘excellent’ next year,” says Elaine Kornbau, managing editor of best practices publications and market intelligence reports at ZweigWhite. ”Although residential construction slipped in 2006 and is expected to continue its current downward trend through the middle of 2007, strong growth in the health care, higher education, and water/wastewater markets will continue to provide opportunities.”

Based on a market-by-market analysis, the 2007 AEC Industry Outlook identifies 10 hot markets to watch in 2007. The top five markets are:

Health Care. Increases in health insurance costs that are bad news for A/E/C firm leaders trying to control costs are good news for firms working in the health-care market. The increases in health-care expenditures will result in additional capital available for projects.

Higher Education. Higher education construction is at record levels, and colleges and universities are still upgrading and expanding residence halls and educational facilities to deal with increasing enrollments. Improvements to state budgets should improve public funding for capital projects, and a rebounding stock market will be good news for college endowments at private colleges and universities.

Water/Wastewater. Driven by sprawling populations, water scarcity, federal and state regulations, and aging infrastructure, the water and wastewater sector has been a strong sector in the environmental industry in recent years. The one potential obstacle to the market is a slowdown in residential development.

Highways and Bridges. The passage of SAFETEA-LU in August 2005 should continue to keep highway and bridge projects going strong. Owners are still working off pent-up demand in the market due to the nearly two years that passed before a long-term surface transportation bill could be agreed upon.

Power and Energy. The sharp increase in energy prices in 2005 and

2006 have provided energy companies with soaring revenue and profits to invest in capital in major infrastructure projects, making up for a few years of underinvestment. In addition, it has pushed public support and improved the financial viability of the development of alternative energy sources.

Copies of the report can be ordered at .