Construction markets are expected to continue to improve in 2018. Spending is expected to rise 5.6% to $1.3 trillion, and much of the increase is expected to come from commercial and infrastructure markets. The Trump administration is looking to pass an infrastructure plan and that could drive construction growth further in 2019 and beyond. Given the improving fundamentals and the possibility that the Trump administration’s plans may be another catalyst, many investors are focused on this space.
There appears to be a renewed interested in modular and prefabrication construction in 2018. Much of the attraction is the condensed construction schedule, lack of weather delays due to the controlled environment and a safer environment because workers do not have to work at the height they would at some onsight construction sites. Last year, Marriott committed to having 13% of hotels built this year with modular construction.
Technology is reshaping many industries, including construction. It aims to address safety, productivity and labor shortages. Robots are handling many repetitive tasks, autonomous equipment is being used for earthmoving activities, and drones can conduct site surveys and inspections. Virtual and augmented reality software are being used to help visualize projects and train workers. Katerra, a technology company optimizing every aspect of building development, design, and construction, is one example of investor interest in the space as it recently raised $865 million from SoftBank’s Vision Fund and others including Canada Pension Plan Investment Board and Soros Fund Management. Another example includes Doxel, an AI company using robots to boost productivity on construction sites raised $4.5 million at the end of January.
Continued Sustainable and Green Projects
Sustainable and green construction projects have become increasingly prevalent and we think the momentum will continue as construction firms think about net-zero building, green components, and recycling construction waste. Given the natural disasters (hurricanes, flooding and wildfires) seen during 2017, companies will also be thinking about resiliency and ability to withstand these forces.
In short, we think many investors will focus on the construction space in 2018 given the expectations for outsized growth and the possibility for further spending tailwinds related to an infrastructure spending plan.
Founded in 2009, Castle Placement raises equity and debt capital for private middle market companies across a broad spectrum of industries. Highly experienced investment bankers and a robust, data-driven, innovative technology platform – including artificial intelligence/machine learning – match great companies with global institutional investors. Castle Placement’s proprietary app, CPGO, connects companies with investors in real time. It has over 64,500 private equity, venture capital and strategic investors, family offices, pension funds, foundations, endowments, sovereign wealth funds, hedge funds and lenders.