Last year in my September editorial, I discussed how our 2022 Top 50 Electrical Contractors had continued to ride the recovery wave in a post-pandemic world, raking in an unprecedented gain of more than 20% in revenue from the previous year, reaching $40.9 billion as a collective group — and marking the highest year-over-year jump in the last 15 years of conducting this survey. Anticipating that the top players in electrical contracting were bound for a rebound definitely turned out to be an understatement. Fast forward to today, and I couldn’t help but smile when I finished calculating the final 2023 Top 50 survey results, saw the rise in revenue, and read the accompanying special report, written by Veteran Freelance Writer Tom Zind, who analyzes this data for us every year based on historical trends.
Ironically titled, “Resilient Revenue,” the cover story, chronicles how the top electrical contracting companies in the country overcame substantial obstacles in 2022 and delivered a combined revenue rise of 7.4% or $43.9 billion. When it comes to challenges affecting the electrical construction industry, according to sources interviewed for this article, many of the “usual suspects” are still in play. This includes the softening of certain vertical markets, rising interest rates, an increase in construction costs, ongoing supply chain issues (which passed “delayed projects” as the factor most survey respondents felt had the greatest short-term impact on their business), extended material and equipment lead times, rising material costs (distribution equipment was identified as the material experiencing the greatest price increase in 2022, passing wire and cable from last year), inflation, and trouble recruiting/retaining top talent in certain key positions (80% of Top 50 companies indicated they continued to experience workers shortages with “electrician,” “electrical foreman,” and “project manager” being the most difficult positions to fill).
There weren’t too many surprises related to market performance. For the sixth year in a row, data center/mission critical construction held its place as the top market bringing in the greatest dollar volume of projects in 2022 for Top 50 companies, followed closely by manufacturing. Not surprisingly, the private office, hospitality, and retail sectors were not so stellar. How does this data compare to some national forecasting indices? According to Dr. Anirban Basu, chief construction economist at Marcum LLP, manufacturing-related construction is definitely a segment to watch.
In his firm’s recent report (released in early September on second quarter data), the Marcum Commercial Construction Index suggests the construction industry retained momentum through the first half of 2023 despite struggles with labor shortages, high borrowing costs, and a tight credit climate. “Manufacturing-related construction — propelled by the Inflation Reduction Act, the CHIPS Act, and the reshoring movement — continues to rise at an astonishing pace, up by more than 100% since the start of 2022,” said Basu in the news brief. “Because of the size, scale, and anticipated duration of many of these projects, not to mention the rate at which they’re being announced, manufacturing-related construction spending should remain elevated through the remainder of 2023.”
Offering a cautiously optimistic outlook in the short term, Marcum’s National Construction Leader Joseph Natarelli reiterated that warning signs and historical trends of a downturn have been out there for some time. “The construction industry, always the first to feel the pinch and last to be relieved of it, saw some minor downturns this June,” he said. “Jobs are plenty, and unemployment is low, but nonresidential spending hasn’t grown over the past year, and that includes the increases we saw in governmental and infrastructure spending. For now, we are advising our clients to take a skeptical and informed eye to the future.”
Based on this year’s Top 50 survey results, the construction industry has held up much better than expected amidst ongoing challenges, so bring on the second half of the year. As I wrote in last year’s column, electrical contractors “have done it before; they’ll do it again — even in the face of some of the most difficult circumstances.” I have no doubt this group will continue to find a way to thrive.