Installation or Erection of Building Equipment, NEC

SIC 1796

Companies in this industry

Industry report:

Special trade contractors primarily engaged in the installation, erection, or dismantling of miscellaneous building equipment make up this industry, which encompasses numerous firms that offer a wide range of services. Common activities include the installation, repair, and dismantling of conveyor systems, dumbwaiters, dust collecting equipment, elevators, incinerators, industrial machinery, power generation devices, revolving doors, and vacuum cleaning systems.

Businesses classified in this industry included more than 3,000 establishments in 2010, according to Dun and Bradstreet. Most contractors in this industry rely heavily on new commercial, industrial, and institutional construction. Industrial buildings account for nearly one-third of the value of construction work done by this industry, followed by office buildings and other commercial buildings.

When building markets boomed during the mid-1980s, most specialty contractors realized healthy growth in billings and profits, and demand for items such as industrial machinery, elevators, and revolving doors increased. Contractors in this business, however, have to cope with the extremely cyclical nature of the nonresidential construction market. For example, industrial building construction expenditures in the United States advanced from $15.0 billion in 1987 to $23.8 billion in 1990. However, from 1991 to 1993 this category fell annually, bottoming out at $19.5 billion in 1993. During the mid-1990s the industrial building market bounced back, reaching $24.1 billion in 1995.

A decade later, all commercial construction was rising after having been dwarfed by housing starts from 2003 to 2005. Total nonresidential construction spending totaled $487 billion in 2005 and increased to $652 billion in 2007. Spending on lodging construction more than doubled from $13 billion to $29 billion, and office construction jumped from $46 billion to $65 billion over the same period. Manufacturing and utilities industries also saw significant increases in construction spending.

These cycles profoundly impact contractors in this industry category. During good times, specialty contractors enjoy healthy profit margins, expanding business, and steady demand for their services. During slow periods, many contractors manage to stay afloat only by taking on installation and repair jobs at very low profit margins. In the early to mid-1990s, for example, elevator contractors were emphasizing elevator retrofits that integrated advanced technology. They also were striving to increase their share of the airport and health care elevator markets.

In the late 2000s, the industry was suffering along with the rest of the U.S. economy. After reaching a high of nearly 2.1 million new housing starts in 2005, housing starts fell to 1.4 million in 2007. The following year, in 2008, the United States experienced a credit crisis, which negatively affected the housing market even further as new housing starts plummeted to 905,000--less than half 2005 totals. As a result, residential construction fell from highs of $620 billion in 2006 to $358 billion in 2008.

The construction industry found no relief in 2009 as new housing starts fell to a 50-year low of 554,000--the lowest amount since the government began recording data in 1959. The construction industry revenues fell a record 12.4 percent, from $1.07 trillion in 2008 to $939 billion in 2009. In June 2010, the Department of Commerce announced that the construction spending that month was estimated at a seasonally adjusted annual rate of $836.0 billion. During the first six months of 2010, construction spending totaled $389.6 billion, approximately 11 percent below the amount spent during the same period in 2009. New housing starts were boosted in the beginning of 2010 due to a federal tax credit, which expired by midyear. Following expiration of the tax credit, residential new builds declined.

In 2010, the industry had approximately 3,000 firms that employed 37,000 workers. About one-third (33 percent) of sales came from installing building equipment, 19 percent from elevator installation and conversion, and 17 percent from machinery installation.

Privately owned companies dominate this diverse industry. The largest companies tend to be diversified contractors that have interests in many areas. As a result, their activities in this industry category are a portion of their overall business. A huge market exists in conveyor systems, dumbwaiters, elevators, and other people- and material-moving devices, for example, and installation and maintenance of them forms only a portion of work that contractors perform in this classification. Otis Elevator Co. of Farmington, Connecticut, which manufactures, installs, modernizes, and maintains elevators, escalators, moving walks, and shuttles, is a subsidiary of United Technologies Corp., which is involved in building systems and aerospace products. In the late 2000s, Otis was the world's number-one maker of elevators, with more than two million elevators, escalators, and moving sidewalks in operation. Four-fifths of Otis' sales, which reached $11.7 billion in 2009, come from outside the United States.

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