United States / Analyst Insights
Key Construction Drivers (Part 4): Industrial Construction Trends

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by Marisa Lifschutz, Senior Industry Analyst/Team Lead
May 13 2019

Operators in the Industrial Building Construction industry (IBISWorld report 23621) construct new manufacturing and industrial buildings and perform alterations, additions and repairs to existing manufacturing and industrial structures. The pharmaceutical, chemical and plastics manufacturing markets represent the largest sources of industry demand. In addition, the industry services smaller markets such as transportation facilities. While industry performance tends to fluctuate in line with demand conditions for the industry’s downstream markets, changes in production technologies and industry decentralization can also influence industry demand.

Manufacturing construction spending rose 9.1% in March 2019, according to the latest data released by the US Census Bureau.  This is an acceleration off the previous month, in which spending climbed 1.0%. Year-to-date manufacturing construction spending, which measures construction spending on manufacturing during the first three months of the year, rose an annualized 5.8% over the five years to 2019. These trends indicate manufacturing and transportation facility construction activity will continue its upward trajectory in 2019, supporting 1.7% revenue growth for the Industrial Building Construction industry to total $45.5 billion in 2019. 



Key demand drivers

Demand for the Industrial Building Construction industry is determined by a confluence of factors. Primarily, industry performance is tied to the health of the US Manufacturing sector (IBISWorld report 31-33) as most industry-specific construction projects are plants and buildings used to produce and distribute manufactured goods. To this end, demand for industrial building construction for a specific type of facility, such as chemical manufacturing buildings or printing houses, is determined by industry-specific growth factors in downstream markets, along with general trends in business investment and economic growth. Manufacturing capacity utilization, which measures the availability of existing US manufacturing space, is one of the most prominent indicators of industry performance. As this rate rises, the availability of existing US manufacturing space falls, which precipitates increased demand for industrial and manufacturing building construction as manufacturers require more space to expand production.

The industrial production index, which measures the output of the US mining, manufacturing, electric and gas industries, is another indicator of industry performance. A rising industrial production index value indicates heightened economic activity within these sectors, which is indicative of rising demand for building construction for such facilities. Lastly, private investment in manufacturing structures is another strong indicator of industry demand as this driver directly measures the level of investment allocated toward manufacturing facilities. Over the five years to 2019, manufacturing capacity utilization is anticipated to grow an annualized 0.6%, including a 2.8% boost in 2019. While relatively slow, growth in this driver has supported positive industry performance during the five-year period. Furthermore, the industrial production index is anticipated to rise an annualized 1.0% over the five years to 2019, supporting growth in demand for oil and gas-related building construction such as plastics manufacturing facilities, which use oil as a primary input. While private investment growth in manufacturing structures has been comparatively sluggish during the current period, rising an annualized 0.2% over the five years to 2019, an expected 2.1% boost in 2019 is projected to sustain industry growth over the year.

Industry impact

Growth in the Industrial Building Construction industry will favorably influence demand conditions for upstream and downstream industries across the supply chain. For example, building construction materials wholesalers, such as operators in the Lumber Wholesaling (42331), Stone, Concrete and Clay Wholesaling (42332) and Roofing, Siding and Insulation Wholesaling (42333) industries, supply industrial construction contractors with material inputs used in the building process. Additionally, equipment wholesaling industries such as the Tool and Hardware Wholesaling (42371) and Construction and Mining Equipment Wholesaling (42381) industries provide industry builders with various machinery and equipment inputs used for industrial building construction. Operators in these wholesaling industries stand to benefit from growing demand for manufacturing and transportation equipment construction as general contractors will seek an increasing wholesale supply of construction material and equipment inputs.

Furthermore, certain upstream specialty trade contractors, such as operators in the Steel Framing (23812) and Roofing Contractors (23816) industries, will similarly benefit from heightened industrial construction activity. Operators in these industries provide specialist construction services to industrial builders as subcontracted workers. Consequently, these industries will contend with increased employment opportunities in line with an uptick in downstream building activity, benefiting demand for specialty trade contractors.


Key Construction Drivers Series

Part 1: Commercial Slowdown

Part 2: Residential Trends

Part 3: Multifamily Trends


 Edit & Infographic Design by Vicky Wolak and Caroline Redmond