Power distribution: Extreme weather events have revealed weaknesses in U.S. energy infrastructure: Record outages in 2020 led to residents managing an average of 60 hours without power, and outages continue to impact communities across the nation. As the U.S. invests in power grid resil- iency and renewables, green energy providers will be busy, especially when considering the likely forthcoming energy incentives found within the Inflation Reduction Act . Firms that retrofit and perform energy audits on old infrastructure will also find work in otherwise lagging sectors. Construction spending is expected to mirror these key trends over the next five years. For example, data centers, which represent 20% of the office segment, are expected to increase by more than 50% in the next five years. Warehouses made up more than 50% of the commercial space in 2021, and spending here increased by 35% from 2019 to 2021, despite overall declines in commercial construction spending. Additionally, no matter the current economic climate, long-running demographic trends and migration patterns highlight that southern and southeastern states will continue to offer favorable conditions for engineering and construction services. Those same patterns will allow newer and high- growth industries to flourish due to an inflow of labor, backed by local and state governments aggressively supporting busi- ness investments and relocations. Conversely, however, these shifts impose considerable stress on other contracting markets (i.e., western and northeastern states), and challenges become amplified when the broader economy is in recession. Thinking of the economic climate as an accelerant for change imposes considerable risk on those states as their local economies evolve to become less diversified, more concentrated and increasingly dependent on their remaining employers. In those contracting states, labor is further constrained, which becomes a significant limiting factor for future economic growth.
What Can E&C Firms Expect? Given these trends, construction is getting bigger, faster and more complex. Projects are shifting from the small and ordi - nary to large megaprojects, with construction put in place for these expected to increase almost 500% over the next five years to $300 billion . In 10 years, the U.S. megaprojects market is expected to reach $350 billion, according to FMI’s 2019 analysis. With more than $3.5 trillion in megaprojects currently in design or planning phases through 2050 across North America, understanding the trends and market conditions where you operate will be critical to winning business, no matter the size of the contract. Increasing project complexity and size will require E&C firms to invest strategically to manage and deliver these large projects.
Where you are in the next five years matters.
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