General Contractors - Residential Buildings Other Than Single-Family

SIC 1522

Companies in this industry

Industry report:

This industry consists of general contractors primarily engaged in the construction of residential buildings other than single family homes. This type of construction includes new work, additions, alterations, remodeling, and repair of such establishments as apartment buildings, dormitories, and hotels and motels.

Industry Snapshot

Multi-unit housing consists of two or more unit structures, including apartment buildings, dormitories, condominiums, and some townhouses. Apartments comprise approximately 90 percent of all multi-unit construction. Multi-unit housing construction peaked in 2005 at 352,000 units before declining to 336,000 and 309,000 in 2006 and 2007, respectively. A banking crisis in 2008 negatively impacted the housing and construction industry, and, as a result, multi-unit construction fell to 283,000 units in 2008. However, the full effect of the recession hit the industry in 2009, with the number of new builds falling to just 109,000 units. The industry experienced erratic recovery during 2010.

Organization and Structure

General contractors are licensed professionals who agree to arrange and complete a project according to certain plans, specifications, and other related documents detailed in a written contract that documents the specific terms. The responsibility of a general contractor extends to every aspect of construction, except those items so designated within the contract. Developers and owners are sometimes referred to as builders and should not be confused with general contractors as one who contracts with owners to construct a project.

The industry also includes companies that provide maintenance, repairs, and construction improvements to existing buildings. In general, improvement refers to additions and alterations involving major interior and exterior changes to existing residential structures and the replacement of major individual items such as furnaces and water heaters.

Establishments engaged in the building of residential prefabricated structures (except single-family housing) are also included in this industry. Prefabricated buildings are those that are built with various forms of factory-made items, ranging from such simple components as roof trusses, wall panels, and prehung doors and windows to three-dimensional, 95-percent complete modular units. These buildings are constructed from wood (see SIC 2452: Prefabricated Wood Buildings and Components) and metal ( see SIC 3448: Prefabricated Metal Buildings and Components. Such structures first began gaining popularity in the mid-1990s as improved technology, materials, and building processes eliminated much of the negative public perception that had been associated with pre-fabricated housing.
Legal services are needed for almost every step of the construction process. An attorney selected by a contractor must be experienced and have complete knowledge of contract law. The complex and diversified components inherent in the general contracting business often requires several attorneys, specializing in laws that affect contracts between general contractors, owners, and subcontractors, including negotiations, preparing and reviewing contracts, labor law, lien laws, bankruptcy laws, litigation, corporate structure, and general counsel. The choice of a competent general contracting attorney is often one of the most crucial decisions a general contractor can make.

Construction contractors are governed by a significant number of federal, state, and local regulations. Local laws include the inspection and approval of work, the acceptance of plans, the use of certain materials, and the conditions under which labor may be employed, as well as health and safety regulations. Moreover, equipment that comes on site has to be certified safe for use under the conditions of use.

Many large contractor firms employ lawyers that are experts in construction law in their own legal department. A contractor's legal department will often perform many of the functions that are necessary for a general contractor to operate their business.

Despite rising income levels among the prime home-buying age group of 25- to 45-year olds, more people than ever opted to live in apartments. The fastest-growing financial-demographic group for apartments consisted of individuals who earned more than $50,000 annually. The shift was attributed primarily to lifestyle changes among younger people entering the housing market, who preferred living in proximity to entertainment venues and shopping. Moreover, the fast pace of living among young professionals fostered the inclination to avoid the continuous upkeep associated with detached homes. To accommodate these developments, multi-family housing facilities increasingly featured such amenities as swimming pools, fitness centers, and gardens.

Retirees also wielded tremendous influence on construction activity as millions of Baby Boomers reached retirement. As a result, assisted living and retirement living multi-dwelling housing expanded rapidly during much of the 2000s.

Another market that stimulated multi-family residential construction was low-income housing, spurred by tax-exempt municipal bonds and housing tax credits, which financed multi-family building. In addition, real estate investment trusts (REITs) gained popularity, helping hedge against some of the more dramatic market swings, particularly those relating to land costs and occupancy rates.


Multi-unit construction experienced unexpectedly strong sales in the late 1990s compared to single-family detached homes, despite a strong economy that traditionally had favored single-family home purchases. The weakened economy of the early 2000s also helped strengthen multi-unit construction, despite record low interest rates that would also typically have favored single-family home purchases. The trend toward multi-unit living was considered to be partially a result of baby boomers in the United States reaching retirement ages, as retirees typically downsized into multi-unit residences. Even when the economy began to falter at the beginning of the twenty-first century, new multi-family residential construction continued to do well, despite the increase in home ownership spurred by low interest rates.

Apartment starts totaled 333,000 units in 2001, compared to 261,000 units in 1998. Assisted-living facilities began to grow exponentially in the late 1990s. In 1998, construction reached 32,600 units, up 46 percent from 1997, and an additional 31,300 units were built in 1999. Prices per unit skyrocketed as well, from a median of $39,755 in 1993 to $86,667 in 1995. Most analysts predicted the end of the assisted-living construction boom by 2000, and by 2002, the median price had fallen to $65,000 due to a glut of units on the market. Most of the units sold in 2002 (60 percent) had been constructed during the development frenzy of the late 1990s. However, analysts believe the market will recover and eventually flourish as roughly 20 percent of the U.S. population will be in the 65 and older age bracket by 2030. In the low-income building sector, private-activity multi-family housing bond issues skyrocketed from $322 million in 1992 to $2.3 billion in 1998. This trend continued into the early 2000s as bond issues continued to grow, reaching $5.6 billion in 2002.

After apartment construction had outpaced demand through the early and mid-1990s, resulting in increased vacancy rates, contractors were forced to scale back new starts and seek greater shares of revenue from remodeling and repairs, a market that was expected to maintain strong growth over several years. By the end of the decade, however, demand had rebounded, leading to a resurgence of new building activity that continued into the early 2000s. New apartment starts in 2003 had increased 2.8 percent to 316,000 units, although this paled in comparison to the record 1.49 million single-family housing starts that year, reflecting 10.3 percent growth.

Hotel construction, meanwhile, remained a notoriously volatile sector. In the early 1990s, construction spending had been severely impacted by a recession, dropping 35 percent in 1991 and another 47 percent in 1992. By 1995 the sector but had rebounded, reaching $6.4 billion. Total spending for hotel construction reached $17 billion in 1999, up from $14.9 billion in 1998, and was particularly strong in the luxury hotel market. However, analysts familiar with gluts in this market sector had projected correctly that hotel building would decline, along with U.S. economic expansion. The terrorist attacks against the United States on September 11, 2001, combined with the economic downturn, drastically reduced U.S. travel, and by 2003 hotel construction had reached its lowest point in industry history, 53 percent below its record high in the late 1990s. According to PricewaterhouseCoopers, hotel occupancy rates were expected to increase from 59.1 percent in 2002 to 61.6 percent in 2005 as the U.S. economy recovered.

Leading multi-family construction markets in 2004 were primarily in Dallas, Texas; Orlando, Florida; Houston, Texas; Atlanta, Georgia; and Seattle, Washington. Hotel construction, meanwhile, had been strongest in the Pacific and mid-Atlantic regions, while falling in the South, Central, and Mountain regions. The states with the greatest concentration of multi-family construction companies included New York, California, Florida, and Texas. The South Atlantic region of the United States accounted for 92,200 of the 295,429 multi-family permits issued in 2001, while the Pacific Coast accounted for 44,287. The Rocky Mountain states reported 16.6 percent growth as the number of permits issued reached 37,912. The New England states recorded 13 percent growth with 4,948 permits.

The rising costs of land, labor, and materials were among the primary challenges to multi-family contractors at the beginning of the 2000s. Drywall and lumber prices were particularly alarming, while increases in land costs were less pronounced. However, some strong markets, especially in southern cities, had reported significant growth.

According to Robert A. Murray, McGraw Hill Construction vice president of economic affairs, all construction followed the pattern set as single-family housing self-corrected, although the pattern was emphasized by "the turmoil in the financial markets caused by the subprime mortgage meltdown." By 2007, multi-family housing and commercial starts were feeling the impact of tighter lending policies, plunging 34.3 percent while apartment starts plummeted 36 percent in September 2008. Combined multi-family construction, which included condo/co-op units, totaled 198,000 starts during the first eight months of 2007, compared to 224,300 units during the same time in 2006, a 11.7 percent decline.

While housing starts declined 25 percent, home remodeling declined only 1 percent in 2007 to $226.4 billion, of which 76 percent, or $171.6 billion, was spent on home improvements like additions. Maintenance and repairs accounted for the remaining 24 percent or $54.8 billion spent on home improvements. While home prices fell during 2007, expenditures for owner-occupied properties decreased 1.9 percent, and expenditures for owner-occupied single dwellings dropped 4 percent as a result of interest rate hikes and property values plunging.

There were 55,382 construction companies in this industry with total employment reported at 222,664 workers and a value of more than $54 billion in 2007. The largest industry sector was residential construction, not elsewhere classified, with 48,081 companies employing 161,854 workers and industry sales of more than $27 billion. There were 346 combined hotel/motel and multi-family home construction companies with revenues of nearly $1.17 million and 3,118 contractors. There were 556 condominium construction firms that employed 10,652 workers and reported approximately $12.3 million in revenues. The apartment construction segment reported 1,553 companies, 13,512 contractors, and sales of about $4.86 million. New construction in the area of multi-family dwellings was valued at about $3,005.1 million, with multi-family dwelling construction, not elsewhere classified, contributing $2,383.2 million to the industry's bottom line. Roughly 9,465 contractors worked in the remodeling of multi-family dwellings garnering revenues of $1,677.4 million, while renovation of hotels and motels brought in $328.5 million.

"Uncertainty stemming from the credit crunch, and now the deteriorating economy, has led to a continued pull-back among both lenders and borrowers," Jamie Woodwell, MBA's vice president of Commercial Real Estate Research noted in Multi-Housing News in November 2008, adding that "The need among most investor groups to conserve capital, and the uncertainty of how the slowing economy will affect property fundamentals, is fueling a prolonged pause in all aspects of commercial real estate activity."

Current Conditions

The credit crunch that began in 2008 led to a decline in multi-unit housing starts for the year. New starts declined from 283,000 units in 2008 to just 109,000 units in 2009. Of these units, 12,000 were multi-housing structures with two to four units (e.g., duplexes), and 98,000 were structures with five or more units (e.g., apartments).

Total value of lodging construction grew significantly during the second half of the 2000s, nearly between 2006 and 2008, from $18.1 billion to $35.8 billion. However, by 2009 as the economic crisis had set in, and the value of lodging construction dropped to $25.5 billion. Generally, the recession came late to the hotel industry, but as occupancy dropped, hotel profits also declined. To cut costs, hotels either canceled or postponed new building projects. During 2009, hotel construction dropped by 66 percent. However, even as the recession impacted the hotel industry later than the housing and other construction sectors, recovery also came earlier to the hotel industry. By the fourth quarter of 2010, despite a slow recovery of the overall economy, the occupied room demand had returned to 2007 levels and was tracking ahead of the overall economy.

According to industry statistics, in 2009 the industry had 49,272 establishments. Of these, 84.2 percent fell under the general category of general contractors, not elsewhere classified. This segment generated revenues of $26.7 billion. Hotel/motel and multi-family home construction firms numbered 403 and had $456.3 million in revenues. There were 2,112 firms categorized as apartment building construction firms that had sales of $2.73 billion. Condominium construction firms numbered 503 and generated revenues of $2.33 billion.


The construction industry has always been labor intensive. The economic crisis of the late 2000s caused massive layoffs within the construction industry as residential, commercial, and industrial construction all fell off. However, commercial construction did not decline as sharply as did residential construction, and, although erratic, growth returned to the sector more rapidly than to the residential sector.

Industry Leaders

While contractors in the industry tend to be rather small with limited market reach, a few firms stood out as clear market leaders. Family-run A.G. Spanos Construction (father Alex owns the San Diego Chargers) of California, one of the largest apartment builders with nearly 120,000 total starts. In 2007, A.G. Spanos Companies posted revenues of $1.13 billion. JPI of Irving, Texas, achieved revenues of roughly $500 million in early 2000s. In 2010, JPI continued to be one of the largest luxury apartment developers in the United States. The company also constructed dorms. Atlanta, Georgia-based Trammell Crow Residential, which develops, builds, acquires, and manages apartment communities and condominiums from upscale to affordable housing projects, reported $692.1 million in residential starts and 6,300 employees in 2003. By 2007, Trammell Crow employed an estimated 2,300 workers. Colson & Colson Construction of Salem, Oregon, brought in revenues of $900 million in 2002 and employed a total of 7,300 individuals. Colson builds and manages retirement communities throughout the United States, Canada, and England. Revenues were over $2 million in 2009.

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