行业聚焦——第三季度专业建筑和住宅服务市场更新

Q3 2023 - Sector Spotlight Signs of Market Softening but Drastic Declines UnlikelyOutlook stronger for commercial construction; durability across non-discretionary residential services Thoughts for theThird Quarter Non-ResidentialConstruction Although backlogs are returning tonormal, they remain elevatedStrong demand among select endmarkets denotes optimismResidential real estate transactionvolumes and construction startscontinue to fall, and are unlikely torebound in the near-termAlthough labor pressure hasreduced slightly, it remains a topconcern with the growth in recentconstruction jobs Commercial construction activitythroughout the U.S. is bolstered byinfrastructure spending and activity.However, the number of new projects inearly stages show early signs of decline,driven primarily by continued interestrate pressure. Specifically, officeconstruction and renovation continue tosee meaningful headwinds as lingeringWFH trends compound the impact ofinterest rate hikes and tightening credit.Taken as a whole, non-residentialconstruction is still seeing strongdemand across several key endmarkets, particularly large-scalemanufacturing, leaving reason for longerterm optimism beyond 2024. demand challenges stemming fromaffordability challenges at current rates.As a result, large scale remodelingactivity for which existing home salesare an early indicator, could faceheadwinds. And while homeowners whochoose to stay in their homes instead ofselling tend to increase homeimprovement spend, they may opt topostpone large scale projects or Residential Services Existing home sales are at historicallows as a lack of supply driven by abroad base of homeowners locked atbelow market rate mortgages and operational improvement initiatives. Non-discretionary residential services remaina hot sector for PE with roofing, HVAC,plumbing, and electrical services still inhigh-demand. upgrades given both the cost of financingand overall macro uncertainty, especiallythose still intent on selling onceuncertainty subsides. Mergers & Acquisitions Key Takeaways The number of specialty construction andresidential service transactions in themarket has slowed, with large strategicbuyers less active and fewer large,marquee deals compared to 2022. Whileprivate equity buyers remain aggressiveacross many industry sub-sectors,strategic acquirors appear to have shiftedtheir primary focus to organic growth and Most construction and service providerscontinue to report strong performancethrough Q3, but there are signs thatactivity is beginning to slow. Althoughlabor pressure has reduced slightly, itremains a top concern with constructionjob openings leaping to 431,000 inSeptember, a 15% increase from themonth before. Specialty Construction and Residential Services Market Indicators Specialty Construction and Residential Services Market Indicators (Cont’d.) Public Market Overview Industrial Services Industry Takeaways 2023 Market Outlook “However, concrete pumping demand from light commercial projects has continued to be comparativelyweaker as interest rate sensitivity and reduced availability of financing from smaller regional banks has stalledsome projects. Despite this, our expectation for the commercial market in fiscal year 2023 remains stronggiven opportunities with large manufacturing, particularly as we head into another strong seasonal quarter forour business.” - Bruce F. Young, President, CEO, & Director, Concrete Plumbing Holdings “One of the changes that's happened in the market, and I don't see this changing, Brent. If you go back 10, 12years on some of these jobs, what people would have tried to do is they would have tried to take theseprojects and break them up into small pieces as they can, which causes massive coordination issues on thejob and that allows more contractors to bid.” - Anthony J. Guzzi; Chairman, President & CEO, EMCOR Group “If you look at the cash flow we generated for 2023, we are still going strong. With what is coming in 2024, inthe first place, we're going to funnel that cash flow to significantly reduce debt in this crazy market.”- Ronald N. Tutor, Chairman, CEO & President, Tutor Perini Corporation “Bidding activity remains healthy as we strategically pursue and capture new opportunities that position us forpotential future growth. A growing demand for electrification, a continued emphasis on the clean energysources and a focus on grid modernization and hardening continue to be strong market drivers and couldpresent opportunities for consistent success across our business.” - Richard S. Swartz, President, CEO & Director, MYR Group “Revenues of our United States Mechanical Construction segment of $1.33 billion increased $221 million or astrong 19.9% from the year-ago period. This revenue growth continues to be driven by increased activitywithin the high-tech manufacturing, traditional manufacturing, network and communications and commercialmarket sectors.” - Mark A. Pompa, Executive V