Challenges Faced by Commercial General Contractors

Despite a rise in production last year, the construction industry is still likely to make a sluggish recovery. As the economy continues to recover from its recent downswing, the commercial construction industry also continues to grow. However, the industry is still encountering challenges that can affect businesses and investors. When it comes to effectively addressing and handling these challenges, hiring an experienced commercial general contractor is a good way to ensure that your project goes smoothly and successfully. Things are looking up a bit for the construction industry though.

 

New construction starts have been strong in recent months, construction spending rose throughout much of 2011, the production of construction materials has been up for six months in a row, and Caterpillar, Inc. and other large companies have posted strong earnings reports for the past couple of quarters a hopeful sign that small and mid-sized companies will also do better. However, the industry still faces plenty of challenges. Small companies for the most part are struggling because of the sluggish economy, increased competition, rising insurance costs and a shortage of excellent workers. The largest challenge, by far, commercial General Contractor say, is the economy. Although the unemployment rate is dropping and the U.S. economy is showing other signs of recovery, economists and others say the recovery of the construction market will lag behind the overall economic recovery.

 

Commercial general contractors say homeowners and other customers are savvier in the wake of the recession and typically get three or four estimates before they decide whom to hire. This means commercial general contractors are competing for work against two or three of their peers now, compared to one or none before the recession.

 

 

People used to call and say, 'Come do this job for me,' and they'd get around to asking what it would cost. Yet another challenge is rising insurance costs. Insurance market conditions for U.S. construction firms began deteriorating in the second half of 2011, and that is expected to continue this year. Large losses and reduced investment returns caused many U.S. insurers to seek rate increases in 2011. As a result, rates for various construction product lines, such as general liability, builders risk, excess casualty and others, rose, forcing up costs for commercial general contractors, who passed them on to their customers. Cost overruns. Sometimes, projects can get "carried away" and can end up costing significantly more than anticipated. This can occur if materials need to be changed, if there are unexpected delays or additions, or if the planning got out of hand and the building ended up a bit more showy than originally anticipated.

 

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